Solicitor & Client Costs Archives

Retainer Termination Without Good Reason | Unenforceability And The Indemnity Principle

Detailed Assessment, New Costs Blog, Solicitor & Client Costs, Termination of Retainer

The Senior Courts Costs Office’s decision in HD and others v North Devon Healthcare Trust [2026] EWHC 2009 (SCCO) addresses the enforceability of retainers terminated without good reason, the application of the abuse of process test to detailed assessment proceedings, and the circumstances in which a solicitor may be ordered personally to pay costs on the indemnity basis under CPR 44.11.

Background

The six linked claims at the centre of this judgment arose from alleged failings in the consent process relating to the use of synthetic mesh in the treatment of female pelvic conditions, including urinary stress incontinence. The claimants were among a larger cohort of individuals represented by Mr Darren Hanison, a sole practitioner trading as Fortitude Law, who had been instructed to pursue damages claims against various NHS trusts in England. NHS Resolution was notified of 305 such claims, received letters of claim in approximately 100 of them, and compromised 58 on substantially similar terms, including provision for the payment of reasonable legal costs.

Damages in the six linked claims were duly paid. Mr Hanison commenced detailed assessment proceedings in each, serving signed and certified bills of costs on the relevant defendants. The defendants applied to link the six cases, noting the significant similarities between the bills and the common issues likely to arise in points of dispute. On 7 July 2022, Costs Judge James granted that application, and the linked cases were listed for a five-day hearing to determine seven preliminary issues common to all six bills.

The first hearing was listed for 28 November to 2 December 2022. The judge was unwell on 28 November and the matter stood down. Counsel then acting for the claimants served a skeleton argument late that evening. When the hearing resumed on 29 November, it became apparent that Mr Hanison had not lodged the documents required by paragraph 13.11 of the Practice Direction to CPR Part 47. An attempt had been made to provide a laptop computer to the court late on 28 November, but when the judge examined it on 29 November it was found to contain files relating to only three of the six linked claims. The hearing could not proceed. Costs Judge James adjourned it and ordered the claimants to pay the costs of 28 and 29 November, to be assessed if not agreed. The costs order was made against the claimants, not against Mr Hanison personally, and was on the standard basis by operation of CPR 44.3(4).

The preliminary issues hearing was relisted for 27 to 31 March 2023. Costs Judge James heard submissions on all issues, gave judgment on some, reserved others, and provided a reserved judgment on 13 April 2023. A third hearing took place on 17 April 2023 to deal with the remaining preliminary issues. That was the last substantive activity in the detailed assessment proceedings.

On 18 May 2023, the Solicitors Regulation Authority intervened into Mr Hanison’s practice on grounds including suspected dishonesty and failure to comply with regulatory rules. Fortitude Law ceased to trade. Lester Aldridge was appointed as the SRA’s intervening agent. DAC Beachcroft LLP, acting for the defendants, wrote to each of the claimants suggesting they obtain independent legal advice in relation to the costs process. Some appear to have done so, but none engaged actively or to any significant extent in the costs proceedings thereafter.

Disciplinary proceedings were commenced against Mr Hanison on 14 May 2025, leading to a hearing before the Solicitors Disciplinary Tribunal on 24 February 2026. Mr Hanison faced 17 allegations of professional misconduct. He admitted many, including allegations of dishonesty. The SDT found several other allegations of dishonesty proved on the balance of probabilities and, by a written judgment dated 12 March 2026, ordered that he be struck off the Roll of Solicitors.

Mr Hanison was not formally removed from the court record as solicitor for the claimants in the six linked claims until an order of Senior Costs Judge Rowley dated 10 June 2025. From the conclusion of the third hearing before Costs Judge James on 31 March 2023 until the application considered in this judgment, nothing of substance had occurred in the detailed assessment proceedings. No new solicitors came on the record for any of the claimants. None of the other claimants in the wider cohort had commenced detailed assessment proceedings at all.

On 12 December 2025, the defendants issued an application seeking, among other things, a declaration that the retainers and conditional fee agreements between the claimants and Mr Hanison were unenforceable, strike out of the bills of costs and detailed assessment proceedings, repayment by Mr Hanison of payments on account totalling £92,000, an unless order against the wider cohort of claimants who had not commenced detailed assessment proceedings, and orders that Mr Hanison pay the defendants’ costs of the abortive November 2022 hearing and of the detailed assessment proceedings as a whole, on the indemnity basis. The application was supported by witness statements from Mr Mark Ashley and Mr Myles Mundill of DAC Beachcroft. The hearing took place on 3 July 2026 before Costs Judge Joseph. Neither the claimants nor Mr Hanison appeared or were represented.

Service and Joinder of Mr Hanison

After the hearing on 3 July 2026, Costs Judge Joseph raised of his own motion the question of whether Mr Hanison had been properly served with the evidence in support of the application. The judge was also concerned that Mr Hanison, having been removed from the court record by Senior Costs Judge Rowley’s order of 10 June 2025, was not at that moment a party to the action nor representing a party in it. The judge raised these matters with counsel in correspondence following the hearing.

That correspondence generated a further application by the defendants to join Mr Hanison as a party to the action. A further witness statement signed by Mr Mundill was filed in which evidence was given that Mr Hanison had in fact been served, prior to the hearing on 3 July, with the evidence in support of the application. The judge was satisfied that Mr Hanison had been served with the evidence prior to the hearing but considered it appropriate for him to be joined formally into the action for the purposes of the defendants’ application.

On 13 July 2026, the judge made an order to that effect which included various directions requiring service on Mr Hanison of the latest application and the evidence in support of it. As that order was made without a hearing, it included the usual paragraph that any party affected by the order could apply to vary it, stay it or set it aside within seven days of receipt of it. The order also stated that if no application was made within that time, the court would proceed to determine the application dated 12 December 2025 without further submissions. No party applied to vary, set aside or stay that order within the time stipulated. The judge was satisfied that Mr Hanison had had every reasonable opportunity to respond to the application and to make any submissions he might have wished to make.

Enforceability of the Retainers

Costs Judge Joseph began by considering whether the retainers between the claimants and Mr Hanison had been terminated without good reason and were accordingly unenforceable. The claimant HD had waived privilege over her conditional fee agreement following advice from new solicitors. The CFA, exhibited to Mr Ashley’s witness statement, was in fairly standard terms and had been signed by Mr Hanison on 26 September 2018. It expressly covered negotiations about, or a court assessment of, the costs of the claim.

The judge accepted the defendants’ submission that the retainer was an entire contract. Relying on Re Underwood & Piper v Lewis [1894] 2 QB 306, the judge noted that a solicitor’s retainer in an action is ordinarily an entire contract to conduct the action to the end, and that a solicitor cannot sue for costs until the contract has been entirely fulfilled. The retainer with HD plainly encompassed not only negotiations with the defendant about recoverable costs but also, if required, preparation for and attendance at a detailed assessment hearing. Agreement or court assessment of recoverable costs was an express and necessary step required by the retainer.

The judge found that Mr Hanison’s contractual obligations included the obligation to obtain agreement, or a court assessment, of HD’s recoverable costs. Although that process had been started, it had by no means concluded. Following the intervention into Mr Hanison’s practice, there was now no prospect at all of him ever completing his obligations under the retainer. The passage of a very considerable period of time in which no activity at all had occurred supported the inference that he had evinced no intention of so doing. The judge concluded that the retainer between HD and Mr Hanison was unenforceable by Mr Hanison against HD.

The judge inferred that the terms of the retainers between the rest of the claimants in the six linked claims were on the same, or substantially similar terms. The retainer between Mr Hanison and HD was in relatively standard terms. There was no reason to believe that Mr Hanison would have concluded retainers with the other claimants on materially different terms. Had that been the case, it had been open to Mr Hanison to adduce appropriate evidence establishing it. He had not done so. The judge concluded that the retainers between each of the claimants in the six linked claims were unenforceable by Mr Hanison against any of those claimants.

Strike Out for Abuse of Process

The judge then considered whether the bills of costs and detailed assessment proceedings should be struck out, either as a consequence of the unenforceability of the retainers or on the separate ground of abuse of process under CPR 3.4(2)(b). If the retainers were unenforceable, the claimants had no liability to their solicitor for any costs incurred pursuant to those retainers. If they had no such liability, there could be no claim by those claimants against the defendants for any of those costs. Any other conclusion would amount to a breach of the indemnity principle. The further consequence must be that the detailed assessment proceedings had to be struck out, or alternatively that the bills of costs must be assessed at nil.

The judge nevertheless addressed the separate arguments for strike out based on abuse of process. The defendants relied on the two-stage framework in Asturion Fondation v Alibrahim [2020] EWCA Civ 32. At the first stage, the court considers whether the claimant has deliberately allowed the proceedings to become dormant, and if so why. That involves examining the claimant’s intention, to be inferred from the evidence as a whole. The court must assess objectively the strength of any explanation advanced, having regard to the length of the period of inactivity. Prolonged inactivity may itself support the inference that a claimant does not intend to advance the action. Where such stagnation is established, the burden shifts to the claimant to explain why the claim should be permitted to continue.

The judge had no evidence from Mr Hanison. He had been given the opportunity to give evidence and make submissions and had elected not to do so. The claimants in the six linked claims had also had a similar opportunity and had not taken it. No explanation had been given, let alone a credible one. The costs proceedings of the claimants in the six linked claims had been deliberately allowed to become dormant. The extensive and wholly unexplained delay offended against the integrity of the court’s process. The serious abuse of the court’s process had been perpetrated by Mr Hanison, the solicitor and officer of the court whom the claimants in the six linked claims trusted to pursue their claims for costs.

The judge also found that there was now no realistic prospect of any of the detailed assessments in any of the six linked claims being pursued. In addition, there was significant prejudice to the defendants. They had made payments on account of costs in relation to six sets of detailed assessment proceedings. If the detailed assessment proceedings were allowed to remain extant, the defendants presently had no way of knowing when they would be resolved, nor for how much they might be liable. The judge accepted that the failure by the claimants in the six linked claims to take any steps at all since the last hearing before Costs Judge James was, in all the circumstances, a serious abuse of the process of the court.

At the second stage of the enquiry, the court considers whether striking out the claim is a proportionate response to the abuse. The defendants had put forward a possible alternative to strike out, namely an unless order against the claimants in the six linked claims to the effect that if they did not request a substantive detailed assessment hearing within 14 days, their claims should be struck out. The judge concluded that if such a course were a realistic option the claimants would have appeared on the hearing of the defendants’ application to make submissions to that or similar effect. The fact that they had not done so indicated that they had no such intentions. In all the circumstances, the judge did not consider that any useful purpose would or could be served by delaying the strike out of the claims by the claimants in the six linked claims for any further period of time. Immediate strike out was not only the proportionate response to the current state of affairs, but was the only realistic option, in order to do justice between the parties. It would be seriously unfair to the defendants to prolong these matters any further.

Repayment of Payments on Account

The judge dealt with the application for repayment of payments on account relatively shortly in the light of the findings and decisions already made. Now that the detailed assessment proceedings in the six linked claims had been struck out and the retainers between Mr Hanison and the claimants declared to be unenforceable, the case for the return of monies paid to Mr Hanison on account of the costs of the claimants was unanswerable. The payments on account were made on the footing that there were enforceable retainers in existence between the receiving parties and their solicitor. It would, to all intents and purposes, constitute a breach of the indemnity principle for those payments to be retained. There were orders against Mr Hanison for the repayment of all of the payments on account of costs which the defendants had made to him in the six linked claims.

Unless Order Against the Wider Cohort

No action at all had been taken by any of the other claimants in the cohort of claims against the various defendants to progress their respective claims for costs. The defendants had applied for an unless order against those claimants under CPR 47.8. None of the claimants to which this part of the application was directed had been involved in the detailed assessment proceedings commenced by the claimants in the six linked claims. Given that, it was appropriate that those claimants should be given an opportunity, if they so wished, to commence detailed assessment proceedings. The orders for costs in favour of those claimants were made a considerable time ago. It was appropriate for the court to exercise its discretion under CPR 47.8. The power to make an unless order is discretionary. The judge considered it right that the claimants should now be placed under the unless sanction. There was an unless order against those claimants that they should commence detailed assessment proceedings in respect of their costs within 28 days, failing which all of the costs to which they would otherwise be entitled would be disallowed.

Costs Orders Against Mr Hanison Under CPR 44.11

The defendants sought orders that Mr Hanison pay the costs of the abortive hearing on 28 and 29 November 2022 and the costs of the detailed assessment proceedings as a whole, on the indemnity basis. The order made by Costs Judge James on 29 November 2022 had been against the claimants in the six linked claims, not against Mr Hanison. The application now made was for something quite different, namely an order against Mr Hanison personally.

The defendants framed their case pursuant to CPR 44.11, which provides that the court may make an order where a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order, or where it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings, or in the assessment proceedings, was unreasonable or improper. Where those conditions apply, the court may disallow all or part of the costs which are being assessed, or order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.

In relation to CPR 44.11(1)(a), the defendants relied upon various defaults perpetrated in the course of the detailed assessment proceedings by Mr Hanison. They pointed to the failure prior to the first hearing before Costs Judge James to lodge at court those documents which were required to have been lodged prior to the hearing pursuant to paragraph 13.11 of the Practice Direction to CPR Part 47. They also relied on the fact that the failure to lodge the requisite documents was compounded by the attempt to provide documents to the court by means of a laptop computer which, in fact, did not contain the requisite documents.

In relation to CPR 44.11(1)(b), the defendants submitted that the conduct of Mr Hanison throughout the detailed assessment proceedings had been unreasonable. Their main complaint was the substantial delay which had occurred following the last hearing before Costs Judge James. They also pointed to the various rulings which were made by Costs Judge James on the preliminary issues which they said demonstrated that very high and unsustainable claims for costs were made in respect of certain items in the bills of costs. By way of some examples, in respect of the letter of claim sent on behalf of HD, 63.3 hours were claimed, but only 15 hours were allowed. In respect of the letter of response, 66.1 hours were claimed but only 10 hours were allowed and, in respect of the Schedule of Loss, 31.3 hours were claimed but only 7.9 hours were allowed, of which one hour only was at grade A and the rest at grade D.

The judge noted that Costs Judge James had very considerable concerns about the claims for costs which had been made. He shared those concerns. The reductions in the claims on the preliminary issues were substantial, as well as being reductions which one would not normally expect to see in claims for costs of this nature. Of further concern was the fact that Mr Hanison had, to all intents and purposes, abandoned the detailed assessments.

The leading case on the operation of CPR 44.11 is Gempride Ltd v Bamrah [2018] EWCA Civ 1367. Mistakes or negligence, without more, are insufficient to engage the rule. Unreasonable conduct is essentially conduct permitting of no reasonable explanation. In order for the conduct of a legal representative to be unreasonable, that conduct must also breach the legal representative’s duty to the court. The burden of proof is on the applicant and even when the threshold criteria are satisfied, the court still has a discretion as to whether an order ought to be made. Any order made must be proportionate to the misconduct.

The hearings on 28 and 29 November 2022 were wholly ineffective due to the fact that the legal representative for the claimants in the six linked claims had failed to lodge at court prior to the hearing the necessary documents to enable the detailed assessment hearing to proceed effectively. There could be no doubt that a solicitor on the record has the responsibility for lodging those documents and for complying with the requisite practice direction. The judge was satisfied that Mr Hanison was seriously in breach of his duties to the court. That conduct was unreasonable and there was no reasonable explanation for it.

Mr Hanison was not removed from the court record until the order of 10 June 2025 of Senior Costs Judge Rowley. Until that point, he had sole responsibility for the conduct of the detailed assessments on behalf of the claimants in the six linked claims. It is a fundamental obligation on the part of a solicitor that unless and until he is removed from the record, he must act in the matter. This is apparent from CPR 42.2(5) which contains the presumption that a solicitor on the record is acting until the conclusion of the matter. That is the case even if the retainer has been terminated.

Since the last hearing before Costs Judge James, nothing of any substance had occurred. The judge had found that there had been a serious abuse of the process of the court in that respect. It followed from that finding that the conduct of the person who was responsible for that delay was itself unreasonable. There had been no explanation given for it.

The judge found that both CPR 44.11(a) and (b) were engaged. The costs to which the claimants in the six linked claims would otherwise have been entitled had already been disallowed. The defendants’ application invited the court to order Mr Hanison to pay the defendants’ costs of the hearing on 28 and 29 November 2022, and of the detailed assessments as a whole.

The judge had no hesitation in concluding that Mr Hanison should pay the costs of the hearing on 28 and 29 November 2022. His various defaults amounted to conduct which was unreasonable and which, on any analysis, caused the hearing to have to be abandoned. It could hardly be controversial or unsurprising that a solicitor on the record who conducts himself in such a way should end up being ordered to pay the costs of the abortive hearing.

In relation to the rest of the costs of the detailed assessments, the judge reached the same decision. The various significant and substantial reductions in those parts of the bill which were assessed by Costs Judge James on the preliminary issues indicated an attempt to claim very much more than could ever have been allowed on a standard basis assessment. As Mr Hanison had not responded to the defendants’ allegations in this respect, the judge had to proceed with there being no explanation at all as to why and on what basis such high amounts were claimed. The making of a claim for costs, and the signing of a bill of costs which makes very high and unsustainable claims for costs, is itself unreasonable. On that basis, Mr Hanison’s unreasonable behaviour started at the very outset of the detailed assessment proceedings by the signing of the bills. Detailed assessment proceedings are started by the service of a Notice of Commencement and a signed and certified bill (CPR 47.6).

Since the hearings before Costs Judge James, nothing had happened. Mr Hanison had abandoned them and his clients. The judge had found that such conduct amounted to a serious abuse of the court’s process. Nothing of any value had been achieved by them due to the failure of the solicitor on the record to fulfil his obligations and duties to the court.

Indemnity or Standard Basis?

The defendants contended that the costs for which Mr Hanison was liable should be paid on the indemnity basis. The indemnity basis differs from the standard basis in two respects. First, the onus of showing that costs have not been reasonably incurred or are not reasonable in amount is on the paying party. Secondly, there is no requirement of proportionality. See CPR 44.3 and Excelsior Commercial and Industrial Holdings Limited v Salisbury Hannah Aspden and Johnson [2002] EWCA Civ 879.

The criteria for the making of an indemnity costs order have been considered many times. In the very recent case of Breeze v Chief Constable of Norfolk Constabulary [2026] EWHC 1937 (KB), Cotter J set out in some detail the various important rules and decisions on the issue. One of the circumstances in which an indemnity order may be made is where there has been an abuse of the court’s procedure. In Three Rivers DC v Bank of England [2006] EWHC 816 (Comm), Tomlinson J identified the relevant principles. It was emphasised that the court should have regard to all the circumstances of the case and that the discretion to award indemnity costs is very wide.

The critical requirement, before an indemnity order can be made, is that there must be some conduct or some circumstance which takes the case out of the norm. That was emphasised by Christopher Clarke J in Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm) who, having adopted Tomlinson J’s summary in Three Rivers, and noting that an order for indemnity costs was itself a departure from the norm, said that it is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it.

In relation to the hearing on 28 and 29 November 2022, Mr Hanison failed to lodge the necessary papers to enable the hearing to proceed. He provided a laptop computer at the end of the first day which did not contain the necessary documents, and which meant that Costs Judge James had no choice but to abandon the hearing. He thereby wasted significant court time and resources in addition to causing the defendants to expend significant resources which ultimately were wasted. The judge was satisfied that the conduct of Mr Hanison in relation to the hearing on 28 and 29 November 2022 was unreasonable to a high degree such that the case was taken out of the norm. An indemnity costs order in respect of those costs was the appropriate response.

In addition, Mr Hanison had abandoned the detailed assessment proceedings. The result of the findings and decisions which the judge had made was that those detailed assessment proceedings had themselves achieved nothing and that the defendants again had been required to expend considerable time, effort and resources in what had been for all concerned a fruitless and wasteful exercise. Mr Hanison had failed to fulfil his duties to the court in his capacity as the solicitor for the claimants in the six linked claims and as an officer of the court. His conduct was well outside the norm. Taking all the circumstances of this case into account, it was appropriate that Mr Hanison should pay the costs of the detailed assessment proceedings in the six linked claims on the indemnity basis.

Costs of the Application

The defendants’ application had been successful. The general rule under CPR 44.2 is that the unsuccessful party will be ordered to pay the costs of the successful party. Whilst the court has a discretion to make a different order, the judge could see no reason at all to depart from the usual rule in this case. Again, indemnity costs were sought and for the same reasons as were given above, it was appropriate that an indemnity order should be made.

Undertakings

At the hearing on 3 July 2026, the judge expressed a concern that, notwithstanding the application now being made by the defendants, the defendants might still have the right to pursue the claimants in the six linked claims personally in respect of the costs which the defendants had incurred in these detailed assessment proceedings. The judge enquired whether the defendants might be prepared to provide the court and those claimants with appropriate undertakings not to do so. In making that enquiry the judge made it clear that the court had no right to require any such undertakings to be given, and that whatever judgment might be reached on the defendants’ application would in no way be conditional upon such undertakings being given. Mr Ashley gave appropriate undertakings dated 31 July 2026 on behalf of his clients.

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No Double Recovery | Represented Party Cannot Claim Both Solicitor Fees And Director’s Time

Criminal Costs, New Costs Blog, Solicitor & Client Costs

The Senior Courts Costs Office’s decision in R (TM Eye) v Dean Hall and R (TM Eye) v Radu and Teodorescu [2026] EWHC 1193 (SCCO) concerned the costs of two conjoined appeals by a private prosecutor against hourly rates assessed by the Legal Aid Agency under section 17 of the Prosecution of Offences Act 1985.

Background

TM Eye Ltd is a private prosecution company that undertakes surveillance, investigative and test purchase operations in connection with the sale of counterfeit goods. As a private prosecutor, it is entitled to recover its costs from central funds under section 17 of the Prosecution of Offences Act 1985, with those costs assessed by the Legal Aid Agency (“LAA”). Two separate prosecutions had been brought by TM Eye Ltd, one against Dean Hall and one against Florentina Radu and Carmen Teodorescu. In both cases, costs orders under section 17 were made in TM Eye Ltd’s favour.

On assessment, the LAA’s Determining Officer awarded hourly rates of £89 per hour for surveillance, preparatory and investigative work and test purchases of counterfeit goods, and £32 per hour for travel. TM Eye Ltd appealed those rates to the Senior Courts Costs Office. In January 2026, Costs Judge Leonard gave judgment on the two appeals together, increasing the rates awarded. The Judge awarded £107 per hour for all work, save for supervision carried out by Mr McKelvey, the Appellant’s sole director, which was awarded at £142 per hour. The Judge found that the LAA had been paying the same hourly rates for years, based on historic Costs Judge decisions, and that those rates were not reasonably sufficient to compensate the Appellant in accordance with the relevant statutory provisions. In the absence of more helpful evidence from either party, the Judge applied a straightforward inflation-based adjustment using public records.

Following the substantive judgment, the question of the costs of the appeal fell to be determined. The Appellant produced a costs schedule in form N260 totalling approximately £45,052. It was also noted that some 28 further claims had been put on hold by agreement pending the outcome of the appeal, and that the benefit of the judgment to the Appellant across those claims was estimated at in excess of £200,000. The Judge noted however that he had no substantive evidence of that figure. The costs of the appeal were determined by Costs Judge Leonard on 18 May 2026.

Costs Issues Before the Court

The jurisdiction to award costs of the appeal arose under regulation 10(14) of the Costs in Criminal Cases (General) Regulations 1986, which permits the court to award to a successful appellant “a sum in respect of part or all of any reasonable costs (including any fee payable in respect of an appeal) incurred by him in connection with the appeal“. The Judge noted at the outset that this discretion is materially different from the costs regime under CPR 44. There is, for example, no general rule that a successful appellant will be awarded its costs; it is a matter for the court.

The Respondent, represented by Richard Clarke for the Lord Chancellor, did not contest the principle that some costs should be awarded to the Appellant. The dispute centred on the amount. The Respondent argued that the Appellant had failed on so many of its arguments, and had achieved an outcome so far short of what it had sought, that recovery should be limited to 33% of its costs. Alternatively, the Respondent proposed an issue-based approach under which several categories of costs should be disallowed entirely. The amount of time claimed was also challenged.

The specific items in dispute within the costs schedule included: the hourly rate claimed for Mr McKelvey’s time (claimed at £330 per hour, being the rate sought on the substantive appeal rather than the rate actually awarded); the time claimed for Mr McKelvey’s witness statement and exhibits; the time claimed for bundle preparation; and the time claimed for client attendances. A professional fee of £3,000 claimed for Mr Conway, the Appellant’s accountant and unofficial financial director, was also in issue.

A more fundamental objection also arose in relation to Mr McKelvey’s time. The Appellant had been represented throughout the appeal by Mr Strickland of Thomas Legal Costs Ltd, a fully qualified Costs Lawyer with the right to conduct litigation and to undertake advocacy on costs issues. Thomas Legal Costs Ltd was on the court record for the Appellant. The costs schedule had been drawn up so as to include both Mr Strickland’s time and Mr McKelvey’s time, as if both were legal representatives. The question arose whether it was permissible for the Appellant to claim both the costs of its legal representative and the time spent by its own employee on the litigation.

The Parties’ Positions

The Appellant contended that it had achieved significant success, both in the two cases under appeal and more broadly, given the knock-on effect on the 28 further claims that had been stayed pending the outcome. It submitted that the benefit of the appeal to the Appellant was estimated at in excess of £200,000 across those claims alone, and that it had had no realistic alternative but to pursue the appeals in order to establish its entitlement to be compensated at appropriate hourly rates. On that basis, the Appellant argued for recovery of its costs in full or close to full, relying in part on CPR 44 criteria and associated legal authority.

The Respondent’s position was that the Appellant’s success was substantially qualified. The Appellant’s primary case, that it should be paid for all work and all travel time at fixed rates far in excess of those actually awarded, had always been unsustainable in principle and had failed. The evidence produced in support of the claimed figures had been found to be inadequate. The Appellant’s case that recoveries under section 17 orders had caused its business to move from profit to loss had also failed, with the key evidence from Mr Conway found to be contradicted by evidence given by Mr McKelvey and Mr Hobbs in an earlier case, R (TM Eye Ltd) v Abdullah. The Respondent submitted that a 33% recovery was appropriate, or alternatively that an issue-based approach should be adopted with several categories disallowed entirely. The Respondent also challenged the inclusion of Mr McKelvey’s time in the schedule and the rate at which it had been claimed.

The Court’s Decision

Costs Judge Leonard began by addressing the legal framework. The award was made under regulation 10(14) of the Costs in Criminal Cases (General) Regulations 1986, not under CPR 44. The Judge noted that the Appellant’s submissions had referred to CPR 44 criteria and related authority, but made clear that the discretion under regulation 10(14) operates differently. There is no general rule that a successful appellant recovers its costs.

The Judge rejected the Respondent’s submission that the Appellant had wrongly based its case on a right to profit from private prosecutions and had lost that argument. The Judge accepted that the relevant statutory provisions confer a right to compensation for expenses incurred, not a right to profit. However, applying Re Eastwood [1975] Ch 112, “profit” in this context meant no more than the Appellant’s capacity to remunerate Mr McKelvey appropriately as its sole director. The Respondent’s point was therefore more hypothetical than real, and in practical terms the Appellant had the better of that argument.

The Judge acknowledged that the Appellant’s stated grounds had largely failed. The primary case, that all work and travel time should be paid at fixed rates far in excess of those awarded, was described as always having been unsustainable in principle. The evidence in support was inadequate. The case based on the business moving from profit to loss also failed, with Mr Conway’s evidence found to be contradicted by earlier evidence from Mr McKelvey and Mr Hobbs in R (TM Eye Ltd) v Abdullah, the discrepancies being sufficiently stark to cast doubt on the credibility of the Appellant’s evidence generally. The comparable market rate evidence offered by both parties was found to be one-sided and entirely unhelpful. The Judge observed that relevant market evidence did exist and might ideally have been addressed in an independent expert’s report, but no such report had been produced. The result was that the Judge had fallen back on a simple inflation-based adjustment using public records.

Turning to the costs schedule itself, the Judge addressed the inclusion of Mr McKelvey’s time. The Appellant had been represented by Mr Strickland of Thomas Legal Costs Ltd, a fully qualified Costs Lawyer with the right to conduct litigation and advocacy on costs issues. The Appellant was therefore not a litigant in person, and the principles applicable to litigants in person did not apply. Applying the principle in Richards v Wellington (Plant Hire) Ltd v Monk and Co (1984) Costs LR Core Vol 79, Bingham J at page 83 (citation as given in the judgment), the Appellant could recover only legal costs, not the cost of being a litigant. It was not open to the Appellant to claim both the costs of its legal representative and the cost of the time spent on the litigation by its own employees. Mr McKelvey did not fall within any of the limited exceptions to that rule as he was not legally qualified, nor was he an expert witness.

The Judge found that the Appellant’s costs schedule was incorrectly drawn up in that it incorporated both Mr Strickland’s time and Mr McKelvey’s time as if they were both legal representatives. For example, under “attendances on client” it was not permissible to claim both 7.4 hours of Mr Strickland’s time as the legal representative and 7.4 hours of Mr McKelvey’s time as, in effect, the client upon whom Mr Strickland was attending. Only Mr Strickland’s time was recoverable. Mr McKelvey’s time was disallowed in its entirety.

The Judge also declined to allow the fee of £3,000 claimed for the professional fees of Mr Conway, given the concerns about his evidence. The time claimed for the preparation of bundles was also found to be excessive. The bundle itself was relatively straightforward. The Judge was unable to understand why, in addition to some 9 hours claimed by Mr Strickland for working on it, an additional 17 hours was claimed for a paralegal. Given the amount of time spent by Mr Strickland on the bundle, the paralegal’s role must have been purely administrative. It was disallowed in its entirety.

The Judge marked as disallowed or reduced time which was considered to be irrecoverable, excessive or, in one instance, incorrectly calculated. This brought the total down from £45,052 to just over £22,000, reflecting Mr Strickland’s reasonable time and a small amount of recoverable disbursements. The Judge bore in mind however that some of that time, albeit reasonable in amount, would have been spent upon evidence which had been found to be unreliable or unhelpful, and so would have been unreasonably incurred. The amount payable by the Respondent for the Appellant’s costs of the appeal was accordingly reduced further, and was assessed at a total of £15,000 inclusive of disbursements.

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Conditional Value Reservation Does Not Prevent Rendering Of Interim Statute Bills Where No Uplift Agreed

CFAs & Success Fees, New Costs Blog, Solicitor & Client Costs

The High Court’s decision in Mehta v Howard Kennedy LLP [2026] EWHC 968 (KB) confirms that a reservation in standard terms of business permitting a value or importance element to be charged in a concluding bill does not prevent earlier invoices from constituting interim statute bills where the retainer contains no success-related, conditional, or contingent fee arrangement.

Background

Vishal Mehta was subject to a worldwide freezing order and instructed Howard Kennedy LLP to act for him in that litigation. In related civil proceedings, a fraud of US$1 billion was alleged. Over the period from 22 June 2022 to 5 May 2023, Howard Kennedy delivered 24 invoices to Mr Mehta with a total value of £3,124,674.04, many of which had been paid.

Mr Mehta subsequently issued Part 8 proceedings under the Solicitors Act 1974, seeking an assessment of the costs billed by Howard Kennedy. The central question was whether the 24 invoices constituted interim statute bills — each final and complete in respect of the period they covered — or whether they formed a series of interim invoices comprising a so-called “Chamberlain” bill, which would only become final upon delivery of the last invoice in May 2023. The distinction was critical: if the invoices were interim statute bills, the time limits under s. 70 of the 1974 Act would apply, and Mr Mehta would be debarred from seeking assessment of those bills in respect of which the relevant time limits had expired.

On 25 April 2025, Costs Judge Whalan handed down judgment on three preliminary issues: Mehta v Howard Kennedy LLP [2025] EWHC 1008 (SCCO). He found against Mr Mehta on all three issues, holding that the invoices were interim statute bills, that the retainer was not a Contentious Business Agreement (“CBA”) within the meaning of ss. 59 to 63 of the 1974 Act, and that there were no special circumstances justifying assessment under s. 70(3).

Mr Mehta appealed to the High Court. The appeal was heard by Mr Justice Kimblin, sitting with Costs Judge Nagalingam as an assessor, on 17 April 2026, with judgment handed down on 24 April 2026. Robin Dunne of counsel appeared for Mr Mehta, instructed by JG Solicitors. Dan Stacey and Chris Cooke appeared for Howard Kennedy, instructed by the firm itself.

Costs Issues Before the Court

Three preliminary issues fell to be determined, each arising from the application of the 1974 Act to the retainer between Mr Mehta and Howard Kennedy.

The first issue was whether the 24 invoices delivered by Howard Kennedy were interim statute bills — each final and complete in respect of the period covered — or whether they were interim invoices forming part of a composite “Chamberlain” bill, which would only crystallise as a statute bill upon delivery of the final invoice. This distinction is of considerable practical importance. Under s. 70 of the 1974 Act, a client has an absolute right to seek assessment within one month of delivery of a statute bill. Between one and twelve months after delivery, assessment remains available but is at the court’s discretion. After twelve months from delivery, assessment requires the demonstration of special circumstances and, critically, is entirely barred twelve months after payment. If the invoices were statute bills, Mr Mehta’s right to seek assessment of the earlier invoices was either time-barred or subject to the special circumstances threshold.

The second issue was whether the retainer constituted a CBA within the meaning of ss. 59 to 63 of the 1974 Act. A CBA is not subject to the time limits in s. 70, and a finding that the retainer was a CBA would therefore have opened the door to assessment regardless of when the invoices were delivered or paid. The court stayed determination of this issue pending the Court of Appeal’s forthcoming judgment in Barnes v BDB Pitmans (CA-2025-000773), listed for hearing on 13 May 2026, which was said to raise strongly overlapping issues.

The third issue comprised two distinct sub-questions. The first was whether certain invoices had been “paid” within the meaning of s. 70(4) of the 1974 Act, given that some had been discharged not by Mr Mehta personally but by third party companies and by Hogan Lovells in respect of an adverse costs order. The second was whether, even if the invoices were statute bills and had been paid, special circumstances existed under s. 70(3) sufficient to justify an order for assessment notwithstanding the time limits.

The Parties’ Positions

Issue 1 — Statute Bills

For Mr Mehta, it was submitted that the invoices were not interim statute bills because the retainer reserved to Howard Kennedy the right to revisit charges in a concluding bill by reference to the “value” or “importance” of the matter. Reliance was placed on paragraph 5(2) of the Terms of Business, which provided that if the value or importance element was achieved only as a result of the completion or final settlement of the case, and had not been taken into account in earlier bills, Howard Kennedy reserved the right to take it into account in the concluding bill. It was argued that this reservation qualified the finality and completeness of the earlier bills, such that they could not be interim statute bills, applying the principles in Ivanishvili v Signature Litigation LLP [2024] EWCA Civ 901. The argument proceeded on the basis that this reservation applied to all retainers entered into on Howard Kennedy’s standard Terms of Business.

For Howard Kennedy, it was submitted that the Terms of Business were clear: paragraph 5(2) stated in terms that “each bill issued to you is a final bill covering the total charge for the work carried out within the stated period” and that “each bill has the status of a statute bill”. The value and importance reservation was conditional in nature and had no application to this retainer, which was not concerned with any particular outcome amounting to success and contained no conditional or contingent fee arrangement. There was no agreed uplift and no conditional fee, distinguishing the position from Ivanishvili. The invoices themselves contained the necessary features of a statute bill, being detailed and setting out the client’s rights under the 1974 Act.

Issue 3(a) — Payment

For Mr Mehta, it was submitted that payments made by third party companies and by Hogan Lovells did not constitute payment by Mr Mehta for the purposes of s. 70(4). It was argued that only Mr Mehta, as the signatory to the retainer and the party chargeable, could make a payment capable of triggering the absolute bar under s. 70(4). Reference was also made to Bill 445657, in respect of which a payment of £80,000 was said to have been made on the same day as the bill was raised, which it was submitted could not satisfy the requirements identified by the Supreme Court in Oakwood Solicitors Ltd v Menzies [2024] UKSC 34.

For Howard Kennedy, it was submitted that the payments made by third parties were made with Mr Mehta’s knowledge and consent, as established by witness statement evidence. Reliance was placed on Re Jackson [1915] 1 KB 371, cited in Menzies, for the proposition that payment by a third party at the direction of or with the knowledge of the client constitutes payment for the purposes of s. 70. The Costs Judge had found nothing irregular or ineffective in such payments, and those findings of fact were said to be unimpeachable.

Issue 3(b) — Special Circumstances

For Mr Mehta, three special circumstances were advanced: first, that Howard Kennedy had failed to provide adequate estimates of future costs; second, that the size of the bills was itself a special circumstance; and third, that the fact of rendering interim statute bills was itself capable of constituting a special circumstance. It was submitted that the Costs Judge had failed to address the second and third of these matters adequately.

For Howard Kennedy, it was submitted that Mr Mehta had received regular, itemised invoices with detailed accounts of the work done, had paid approximately 80% of the invoices, and had received appropriate estimates of future costs throughout the retainer. The Costs Judge’s evaluative judgment that no special circumstances existed was said to be correct and not susceptible to challenge on appeal.

The Court’s Decision

Issue 1: Statute Bills

Kimblin J dismissed the appeal on the first issue. Applying the principles of contractual interpretation in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, he held that the meaning of the retainer documents was that which a reasonable reader would understand, having all of the background knowledge of the parties at the time the retainer was entered into on 1 June 2022.

The judge agreed with the Costs Judge’s analysis. The Terms of Business stated clearly that “each bill issued to you is a final bill covering the total charge for the work carried out within the stated period” and that “each bill has the status of a statute bill”, unless otherwise stated. The Terms of Business also referred to the solicitor’s right to sue.

The reservation at paragraph 5(2) concerning value or importance was conditional in nature and had no application to this retainer. The retainer was not concerned with a particular outcome which would amount to ‘success’, nor were there any conditional or contingent fees or payments. The value and importance term within paragraph 5(2) was conditional on two matters. First, it was conditional on ‘value’ or ‘importance’ being achieved only as a result of the completion or final settlement of the case. This was a term of the contract which may or may not apply, depending on the type of work being undertaken and the way in which the fee structure was agreed. Second, it was conditional on the ‘value’ or ‘importance’ not being taken into account in earlier bills. Per paragraph 1 of the Terms of Business, the level of fees was explained as reflecting a number of factors, including value and importance. An hourly rate may be set having regard to these factors and so be included in monthly bills.

The judge added that Section 8 of the retainer letter concerned “Payments on account”, requesting £40,000 and making clear that further payments would be requested. It warned Mr Mehta that “We are bound to apply funds received from you on account to settle any bills we may render to you.” It was therefore clear that funds on account would be used to pay bills which would be delivered, usually monthly.

The judge also noted that Part 30 of the Terms of Business stated that the retainer letter prevails in the event of conflict. While there was no conflict, this served to emphasise the point that the retainer letter did not suggest any conditionality in the fee agreement.

The General Notes, though not forming part of the contract, were relevant to its interpretation because they comprised material on which Mr Mehta elected to sign the retainer and enter the contract. The Notes confirmed that the additional fee reservation was only applicable if it was discussed in advance or referred to in the engagement letter. Insofar as no such discussions took place with the solicitor, it did not apply.

The judge rejected the submission that the retainer was ambiguous by reason of the statement that each bill was a statutory bill but was not necessarily a final bill in the matter. This term was simply a consequence of billing every month. It explained that the bill was final for the month but not for the case. Another way of putting it would be that it was not necessarily the last bill in the matter.

The invoices themselves contained the necessary features of a statute bill, being both detailed and stating the rights available under the 1974 Act. Taken together, the terms and the facts of the case established that the invoices were statute bills.

Kimblin J acknowledged the policy concerns identified by the Court of Appeal in Ivanishvili and other cases regarding the scheme of s. 70, which is problematic from the point of view of a client who must either challenge the very solicitor representing him in hard fought litigation or change solicitor with the disruption to his case which that entails. However, those policy issues were not for the Costs Judge to resolve, nor did they form part of the court’s role on appeal.

Issue 2: Contentious Business Agreement

The Costs Judge had held that the retainer was not a Contentious Business Agreement under s. 59 of the 1974 Act, to which the time limits under s. 70 do not apply. Kimblin J stayed consideration of this issue pending the Court of Appeal’s decision in Barnes v BDB Pitmans (CA-2025-000773), listed for hearing on 13 May 2026, which was said to raise issues which at least strongly overlap with the issues in this appeal. The judge did not see any impediment to informing the parties of his decision on the first and third issues and should not delay communication of those decisions without good reason. Ground 2 therefore remains undetermined.

Issue 3(a): Payment

Kimblin J dismissed the appeal on the payment issue. The Supreme Court in Oakwood Solicitors Ltd v Menzies [2024] UKSC 34 held at [71] that payment by deduction or retention requires a settlement of account, which in turn 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. A payment by a third party at the direction of or with the knowledge of the client can be payment for the purpose of s. 70: Re Jackson [1915] 1 KB 371, cited in Menzies.

The Costs Judge had held that all payments were made in accordance with the court’s provision and scrutiny in the worldwide freezing order. He found nothing irregular or ineffective in payments from a third or non-chargeable party, so long as these payments were made with the knowledge and consent of the client. The witness statement adduced in support of Howard Kennedy’s position established these payments were made with Mr Mehta’s knowledge and consent.

A further issue arose in relation to Bill 445657, which was said to be paid in full yet payment of £80,000 was said to have been made on the same day as the bill being raised. The judge noted that this could not satisfy the Menzies criteria, and that it was not explained how or why the bill was part paid from client account and part paid from office and which entity paid which elements. This issue was not considered at all by the Costs Judge.

Kimblin J nonetheless had no good reason to interfere with the Costs Judge’s findings of fact, nor his application of the law. Moreover, they were correct. Mr Dunne’s argument was artificial and unsupported by any factual context which suggested anything other than Mr Mehta causing his liabilities to be discharged from the variety of sources at his disposal. It would produce counter-intuitive results, contrary to the scheme of s. 70. If the argument were correct, it would create an easy mechanism to avoid the terms of the agreement which the client had entered into, namely to ensure that payments were made by some legal entity other than the person signing the retainer. That would have a large impact on the scheme of s. 70.

Issue 3(b): Special Circumstances

Kimblin J dismissed the appeal on the special circumstances issue. Whether special circumstances exist is essentially a value judgement, comparing the particular case with the run of the mill case in order to decide whether a detailed assessment in the particular case is justified, despite the restrictions contained in s. 70(2): Falmouth House Freehold Co. Ltd v Morgan Walker LLP [2010] EWHC 3092. Special circumstances do not have to be exceptional circumstances but can be established by something out of the ordinary course, sufficient to justify departure from the general position under s. 70 of the 1974 Act.

The Costs Judge did not find that special circumstances existed because Mr Mehta received regular, itemised invoices with detailed accounts of the work done and so understood his ongoing liability. He paid almost 80% of the invoices.

Kimblin J was not persuaded that the Costs Judge failed to consider whether the fact of rendering interim statute bills was itself a special circumstance. The Costs Judge stated that Mr Mehta was neither unaware nor disadvantaged by the size of the payments demanded by Howard Kennedy, as invoices were delivered on a regular, monthly basis. Those were sufficient reasons to address the point raised.

Further, Mr Mehta did receive appropriate estimates of future costs. On 30 June 2022 the partner with care and conduct sent an email to estimate costs and to highlight how high they were: £11,000 plus VAT per day plus counsel’s fees. On 26 January 2023, in response to a request for a projection of costs, a summary estimate was provided in a total sum of £486,983 excluding VAT. There were other similar types of estimate such as that of 24 March 2023. In the light of these materials, the submission that there was a special circumstance which derived from the lack of estimates was not sustainable.

Whether or not there are special circumstances is an evaluative judgement. It was for the appellant to show that the Costs Judge was wrong, and that had not been shown.

Conclusion

Grounds 1, 3, and 4 of the appeal were dismissed. The court invited the parties to seek to agree draft directions or an order within 14 days of judgment in Barnes v BDB Pitmans in respect of the outstanding CBA issue.

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Engagement Letter Not A CBA Where Hourly Rate Increases Entirely At Solicitor’s Discretion

CFAs & Success Fees, Hourly Rates, New Costs Blog, Solicitor & Client Costs

The Senior Courts Costs Office’s decision in Safra v Wilmer Cutler Pickering Hale and Dorr LLP [2026] EWHC 703 (SCCO) addresses fundamental questions about the requirements for contentious business agreements and interim statutory bills in the context of a high-value international arbitration retainer.

Background

The claimant retained the defendant solicitors in September 2022 to represent him in five consolidated LCIA arbitrations and related proceedings concerning disputes within his family over his late father’s US $23 billion estate. The engagement letter provided for remuneration by reference to specified hourly rates, with provision for the defendant to review and revise billing rates periodically, notifying the client of changes as and when they occurred.

Between December 2022 and September 2024, the defendant rendered invoices totalling over US $35 million. The claimant made payments totalling approximately US $16.4 million but disputed the balance. In December 2024, the claimant applied for assessment of the defendant’s bills under Part III of the Solicitors Act 1974.

The parties agreed that a number of preliminary issues should be determined before any assessment proceeded, including whether the engagement letter constituted a contentious business agreement (CBA), whether the defendant’s invoices were interim statutory bills, when any statutory bills were delivered, and whether the court should order assessment.

Was the Engagement Letter a CBA?

Costs Judge Leonard held that the engagement letter was not a CBA within the meaning of section 59 of the Solicitors Act 1974. While the letter provided for remuneration by reference to hourly rates (a permissible basis for a CBA following the 1990 amendment to section 59), it lacked the requisite certainty.

The critical defect was the engagement letter’s provision for hourly rate reviews. The letter stated that rates would be reviewed periodically and could be revised, with changes notified to the client as and when they occurred. Crucially, the timing and amount of any increases were entirely at the defendant’s discretion, with no fixing mechanism.

The judge distinguished cases such as Acupay System LLC v Stephenson Harwood LLP [2021] EWHC B11 (Costs), where a CFA provided for annual increases at a fixed rate of 3%. Here, the defendant’s right to increase rates was “entirely open-ended” as to both timing and amount. The defendant’s only obligation was to notify the client when increases took effect; there was no requirement for prior consultation or agreement.

Applying Wilson v The Specter Partnership [2007] 6 Costs LR 802, the judge held that “the purpose of a CBA is to fix the fees, or provide a fixing mechanism, so that the parties (and in particular the client) know where they stand.” The engagement letter’s unilateral, open-ended review provisions created “a significant element of uncertainty” inconsistent with CBA status.

The judge also noted that the engagement letter’s reference to the client’s right to apply for assessment under Part III of the Solicitors Act 1974 was inconsistent with it being a CBA, which would have restricted that right under sections 60 and 61.

Would the CBA Have Been Unreasonable?

Although unnecessary given the finding that the engagement letter was not a CBA, the judge considered whether it would have been unreasonable under section 61(2)(b) if it had been a CBA.

The judge found that the negotiation process was fair. The hourly rates were individually negotiated with experienced lawyers acting for a sophisticated businessman, and were set by reference to comparable rates charged by other advisers. The defendant was under no obligation to explain the distinction between CBA and non-CBA retainers.

However, the judge would have found the agreement unreasonable. A retainer providing for entirely open-ended hourly rate increases, while simultaneously removing the client’s rights under section 70 to challenge those rates on assessment, would have been unreasonable. Had the engagement letter been a CBA, it would have been set aside and the defendant’s costs assessed in their entirety.

Did the Engagement Letter Permit Interim Statutory Bills?

The judge held that the engagement letter did contractually permit the delivery of interim statutory bills. The letter provided for “monthly statements for work performed and expenses recorded on our books during the previous month,” stated that such statements were “due and payable upon receipt,” and required the client to raise any queries “in a timely fashion.”

While the word “ordinarily” qualified the timing of monthly statements, the engagement letter clearly indicated that each statement would cover all work performed during the previous month. The reference to expenses “recorded on our books” did not prevent the statements from being interim statutory bills, given the principle in Slade v Boodia [2018] EWCA Civ 2667 that separate bills may be rendered for profit costs and disbursements.

Were the Invoices Actually Interim Statutory Bills?

Despite the contractual right to deliver interim statutory bills, the judge held that the defendant’s invoices were not in fact interim statutory bills because they lacked the essential characteristic of finality.

Each invoice (whether draft or finalised) contained the wording: “Includes only Services and disbursements posted to date.” The judge held that the clear meaning of this phrase was that some work performed during the period covered by each invoice might not have been recorded at the time of delivery and might have to be included in a subsequent invoice. The invoices were therefore expressly not final for the periods they covered.

The defendant’s attempt to interpret this phrase as merely indicating that further charges might be rendered for subsequent periods was rejected as not viable. There would be no reason for an invoice covering a specified period to include a redundant warning about charges for future periods.

The judge also noted discrepancies between draft and finalised invoices. For example, the figure for legal fees in the March 2023 invoice changed from US $967,337 in the May 2023 draft to US $1,011,675 in the September 2023 draft to US $1,017,435 in the September 2024 final version. This supported the conclusion that it could take months for the defendant’s fees for a given month to be finalised, consistent with the warning that invoices might not comprise all fees for the period covered.

The Chamberlain Bill

Since the individual invoices were not statutory bills, the judge held that the complete series of invoices together comprised a single “Chamberlain bill” (following Chamberlain v Boodle & King and Bari v Rosen [2012] 5 Costs LR 851). This bill was delivered on 17 September 2024, when the defendant sent the claimant a comprehensive set of finalised invoices.

The claimant’s application for assessment was made on 17 December 2024, within three months of delivery. The Chamberlain bill was part-paid. Accordingly, the court had jurisdiction under section 70(2) to order assessment without the need to establish special circumstances under section 70(3).

Allocation of Payments

Although unnecessary given the Chamberlain bill analysis, the judge addressed how the claimant’s payments should have been allocated had the invoices been interim statutory bills.

The defendant contended that payments should be allocated to the oldest outstanding invoices first (following the rule in Clayton’s case and minimising interest). The claimant argued that monthly payments of US $400,000 (later US $600,000) were intended to be allocated to the corresponding monthly invoices.

The judge preferred the defendant’s analysis. Under Simson v Ingham (1823) 2 B&C 70, it was incumbent on the claimant to specify how payments should be allocated; failing that, allocation was for the defendant. The only evidence of specific instructions was the claimant’s witness evidence given under cross-examination, which the judge found unreliable. The defendant had clearly explained in October 2023 how it was applying payments, and the claimant had not objected at the time.

Special Circumstances

Again addressing the position had the invoices been interim statutory bills, the judge considered whether special circumstances justified assessment of bills falling within section 70(3).

The judge held that special circumstances did exist, primarily relating to the provision of costs information. The defendant had failed to comply with its obligation under paragraph 8.7 of the SRA Code of Conduct to ensure the client received the best possible information about costs as the matter progressed.

Costs information was provided sporadically. For example, no information was given for the period December 2023 to July 2024 (when bills totalling over US $14 million were incurred) until after termination of the retainer in September 2024. The defendant offered costs information on three occasions but should not have waited to be asked; it was obliged to provide such information proactively and regularly.

The judge also attached weight to the defendant’s response to concerns raised in December 2022. The claimant’s representative had explained that the claimant could not afford fees at the level of the first three months and asked whether fees could be managed at around US $400,000 per month. The defendant’s partner responded: “We’ll find a way to make that or something else he wants work.” This assurance was comparable to a costs estimate and relevant to assessment of reasonableness, following Mastercigars Direct Ltd v Withers LLP [2009] 1 WLR 881. In the event, fees averaged about US $1.5 million per month.

The judge rejected arguments based on the size of individual time charges or expenses, finding these generally explicable given the scale and complexity of the arbitrations. However, the failure to provide adequate costs information as fees accrued to levels far beyond what the client had indicated he could afford constituted special circumstances justifying assessment.

Conditions of Assessment

The judge declined to impose any conditions on the order for assessment. While the claimant was based outside the jurisdiction and was understood to be extremely wealthy, he had already paid almost 50% of the claimed fees. The defendant had been aware from the outset that the claimant was based abroad and could have taken steps to protect its position. The current situation was “at least as much the responsibility of the defendant as the claimant,” particularly given the inadequate provision of costs information.

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The Senior Courts Costs Office’s decision in Hammond v Herrington Carmichael LLP [2026] EWHC 701 (SCCO) concerned whether 29 invoices totalling approximately £174,183.36 delivered during family finance remedy proceedings constituted interim statute bills or a series of interim payments forming a single Chamberlain bill, the resolution of which determined the applicable time limits under section 70 of the Solicitors Act 1974.

Background

The Defendant had been instructed by the Claimant from 10 August 2023 to 26 June 2025 (with an effective hiatus between January and March 2025) in family finance remedy proceedings. The litigation was protracted and comparatively complex. Over the course of the retainer, the parties concluded four separate but continuous retainers. The Defendant delivered 29 invoices between 25 August 2023 and 7 August 2025, covering costs, disbursements and VAT in the total sum of approximately £174,183.36. It was common ground that many of those invoices had been paid or part-paid by the Claimant.

The Claimant applied for a detailed assessment of all 29 invoices pursuant to s.70 SA 1974. It was agreed by both parties that two invoices—225141 (dated 27 June 2025) and 226664 (dated 7 August 2025)—could properly be the subject of such an assessment. The Defendant challenged the Claimant’s entitlement to assessment in respect of the remaining 27 invoices.

The Part 8 claim was issued by the Claimant on 14 August 2025. The matter came before Costs Judge Whalan in the Senior Courts Costs Office, with the hearing taking place on 23 February 2026. Judgment was handed down on 24 March 2026.

The Claimant appeared in person. Ms Aldred appeared on behalf of the Defendant, instructed by Herrington Carmichael LLP.

One notable feature of the underlying litigation was that the Claimant’s legal costs had been substantially funded by his brother-in-law, Mr Garry Moore. After the Claimant had paid the first nine invoices himself (totalling approximately £39,461), he effectively ran out of funds. Thereafter, invoices were settled from monies drawn down from an escrow account funded by Mr Moore, who deposited a total of £120,000 into that account. It was conceded by the Claimant that the monies drawn down from the escrow account constituted “payments” for the purposes of the SA 1974.

The substantive family proceedings had attracted judicial comment regarding the level of costs incurred. On 26 June 2025, HHJ Farquhar observed that the combined costs of both parties amounted to approximately £366,000, representing 73% of the sole non-pension asset, a property valued at £500,000. The judge described the costs as “frankly ludicrous” and referred to “litigation misconduct” on the part of the parties. These observations formed part of the backdrop to the Claimant’s application.

Costs Issues Before the Court

The judgment addressed two principal issues. The first was whether the 29 invoices delivered by the Defendant constituted interim statute bills or whether they formed part of a series of interim invoices delivered on account, which together comprised a single Chamberlain bill that became final only upon delivery of the last invoice in August 2025. The resolution of this question was determinative of the Claimant’s right to seek assessment under the SA 1974, given the time limits imposed by that Act.

The second issue, which arose in the alternative, was whether the Claimant could demonstrate “special circumstances” pursuant to s.70(3) SA 1974, sufficient to justify the court ordering a detailed assessment of those invoices in respect of which the primary time limits had expired or in respect of which the court’s discretion would otherwise need to be exercised.

The practical significance of the interim statute bill/Chamberlain bill distinction is well established. Where invoices are properly characterised as interim statute bills, each bill is treated as a self-contained, final bill for the period it covers. The time limits in s.70 SA 1974 run from the delivery and payment of each individual interim statute bill. By contrast, where invoices are merely interim requests for payment forming part of a Chamberlain bill, the entire series is treated as a single bill, and the s.70 time limits run only from delivery of the final invoice. The Claimant’s case depended on establishing the latter characterisation, which would have brought all 29 invoices within the scope of a single assessment application.

The s.70 SA 1974 framework provides that under s.70(1), where an application for assessment is made within one month of delivery of a bill, the court must order assessment without requiring payment into court. Under s.70(2), where the application is made after that one-month period, the court has a discretion to order assessment on such terms as it thinks fit. Under s.70(3), where the application is made after the expiration of 12 months from delivery of the bill, after judgment has been obtained, or after the bill has been paid (but within 12 months of payment), no order for assessment shall be made except in special circumstances. Under s.70(4), the court has no power to order assessment on the application of the paying party after the expiration of 12 months from payment of the bill.

Applying those provisions to the facts, the court identified three distinct categories of invoices. First, nine invoices delivered and paid more than 12 months before the issue of the Part 8 claim on 14 August 2025 fell entirely outside the court’s jurisdiction under s.70(4). Second, three invoices (211203, 211953 and 211946) could only be assessed if special circumstances were demonstrated under s.70(3). Third, the remaining 15 disputed invoices (dated between 27 August 2024 and 29 May 2025) were subject to the court’s general discretion under s.70(2).

The Parties’ Positions

Interim Statute Bills or Chamberlain Bill

The Claimant submitted that the invoices delivered by the Defendant did not constitute interim statute bills but rather formed part of a single, entire Chamberlain bill. He argued that the Defendant had acted under a single continuous retainer (matter reference HAM540) throughout the relevant period, that the invoices were sequential and related to the same litigation, and that work was ongoing and carried forward between invoices. In oral submissions, the Claimant emphasised that the invoices comprised “very much a running account”, notwithstanding his concession that each invoice covered a defined period. His position was that he had been discharging his fees by instalments as the case progressed, in circumstances where the account, like the litigation, comprised a continuous process.

The Defendant submitted that the invoices were interim statute bills. It was argued that the Client Care Letters, Terms of Business Letters and, in particular, the Standard Terms of Engagement, contained a clear and unambiguous contractual right to render statute bills as final bills for each relevant period. The Defendant relied on three authorities: Richard Slade & Company plc v Erlam [2022] EWHC 325 (QB); Abedi v Penningtons [2000] 2 Costs L.L. 205; and Boodia v Richard Slade & Company [2024] Costs L.L. 753. From those authorities, three general propositions were drawn: the burden of proving that the retainer provides for interim statute bills falls on the receiving party; the retainer must be construed as a whole; and any fundamental ambiguity should be resolved against a construction that permits interim statute bills. The Defendant submitted that, on the proper construction of the retainer documents, there was no such ambiguity. The Standard Terms of Engagement expressly stated that any reference to “an interim invoice” meant an interim statute bill, and each invoice was a complete and final account for the relevant period, with no accumulation of charges between invoices.

The Court’s Analysis

Contractual Construction

Costs Judge Whalan accepted the three general propositions derived from the authorities cited by the Defendant. The burden of proving that the retainer provides for the delivery of interim statute bills, in contrast to requests for interim payments generally, falls on the receiving party. When construing the retainer, it is necessary to refer to the relevant contractual provisions as a whole. In determining whether a retainer does allow the solicitor to render interim statute bills, the court should resolve any fundamental ambiguity against that construction.

The parties had effectively agreed four separate retainers within the relevant period. Each contractual agreement comprised a Client Care Letter (sometimes supplemented by a Terms of Business Letter) and annexed Standard Terms of Engagement. The Standard Terms of Engagement were revised by the Defendant on several occasions during the relevant period, but the following provisions were cited in each version or iteration of the Terms:

Invoicing

In many cases, we will normally render our invoice at or towards the end of your matter (a Final Bill). However, if your matter becomes protracted or we have notified you that Interim Statutory Bills (ISBs) will be issued regularly as the case progresses, we will deliver an ISB to you from time to time. An ISB is an invoice covering the work carried out up to the date of the ISB or a specified earlier date, and issued before the matter ends. This will help you to budget for costs. Also, we may ask you for further payments to settle disbursements that are in excess of the initial payment on account. The initial sum paid on account will not be accounted for in an ISB but will be shown as a credit in the Final Bill. Any reference in correspondence or on invoices to “an interim invoice” means an ISB.

The invoices delivered by the Defendant to the Claimant followed a common format, insofar as they comprised the Invoice, a breakdown or Billing Guide and a Covering Letter. Each invoice set out the costs, expenses and disbursements incurred for the relevant period and provided a payment due date. The invoice was signed and included a note that the Claimant may be entitled to have his charges reviewed by the Court under sections 70, 71 and 72 of the Solicitors Act 1974. The Billing Guide outlined a very detailed breakdown (by date, time and fee earner, with an accompanying narrative) of all the costs and charges incurred during the relevant period. The Covering Letter referred to the invoice and summarised sums due from the Claimant.

Costs Judge Whalan was satisfied, on the proper contractual interpretation of the retainers, that the invoices delivered by the Defendant to the Claimant were interim statute bills, and not just a series of interim invoices delivered as part of a Chamberlain bill. The Terms of Engagement were unequivocally clear. They provided for the delivery of interim invoices and stated that they had the status of interim statute bills. Indeed, the ‘Invoicing’ provision provided for no real alternative characterisation, given that: “Any reference in correspondence or on invoices to ‘an interim invoice’ means an ISB”. Invoices delivered by the Defendant to the Claimant exhibited all the relevant requirements of interim statute bills. They were drafted with considerable detail, meaning that the Claimant was provided with a clear breakdown of the costs, expenses and disbursements. They were signed, provided a payment due date and displayed clearly his right of assessment under the SA 1974.

The court found accordingly that the 29 invoices delivered by the Defendant to the Claimant between 25 August 2023 and 7 August 2025 were interim statute bills within the meaning of the 1974 Act.

Application of Section 70

The effect of this finding, in combination with the fact that various monies had been transferred from (or on behalf of) the Claimant to the Defendant constituting payment within the meaning of the 1974 Act (as confirmed in Oakwood Solicitors v Menzies [2024] UKSC 34), was that some of the invoices delivered by the Defendant to the Claimant could not be the subject of a SA 1974 assessment. Specifically, the court could not order an assessment of the nine invoices delivered and paid more than 12 months before the Claimant issued his Part 8 claim on 14 August 2025. They were: 200405 (25 August 2023), 201690 (29 September 2023), 202391 (27 October 2023), 204546 (21 December 2023), 205426 (30 January 2024), 206520 (28 February 2024), 207616 (28 March 2024), 208840 (2 May 2024) and 210651 (27 June 2024). These fell outside the court’s jurisdiction under s.70(4).

Insofar as the remaining 18 disputed invoices delivered (and paid/part-paid) between 18 July 2024 and 29 May 2025 were concerned, an assessment of 3 invoices—211203 (18 July 2024), 211953 and 211946 (31 July 2024)—could only be ordered at the discretion of the court and subject to the finding of “special circumstances”, pursuant to s.70(3) of the 1974 Act. The other 15 disputed invoices (dated between 27 August 2024 and 29 May 2025) were subject simply to the discretionary power of the court under s.70(2).

Special Circumstances

In Falmouth House Freehold Co Ltd v Morgan Walker LLP [2010] EWHC 3092 (Ch), Lewison J, having reviewed the case law relevant to special circumstances, stated that whether special circumstances exist is essentially a value judgement. It depends on comparing the particular case with the run of the mill case in order to decide whether a detailed assessment in the particular case is justified, despite the restrictions contained in section 70(2). Special circumstances do not have to be exceptional circumstances. As Costs Judge Rowley confirmed in Masters v Charles Fussell & Co LLP [2021] EWHC B1 (Costs), they can be established by something out of the ordinary course, sufficient to justify departure from the general position under s.70 of the 1974 Act.

In Raydens Ltd v Cole [2021] 7 WLUK 539, Costs Judge Leonard, in citing with approval the guidance of Lewison J in Falmouth, added that a helpful test is to consider whether there is something in the fees claimed by the invoices, or in the circumstances in which they were charged, which “call for an explanation”. If they do call for an explanation or further scrutiny, that is a strong indication that there should be an assessment. This is not the time for the explanation to be given and evaluated in detail. That is the purpose of the assessment procedure and the scrutiny it provides.

The Claimant cited four potential special circumstances: (i) judicial findings on costs, proportionality and litigation conduct; (ii) pension disclosure issue; (iii) representation and escalation of costs; and (iv) assertions concerning third parties (Garry Moore).

The Claimant’s core assertion was that the Defendant allowed his litigation costs to increase exponentially to a point where they were unreasonable and disproportionate. He cited specifically the comment made on 26 June 2025 by HHJ Farquhar during the substantive proceedings, who stated that the costs were “frankly ludicrous” and that the total costs between the two parties were £366,000, representing 73% of the sole non-pension asset. The judge went on to refer to “litigation misconduct” and stated: “I simply look at the costs and accept there is litigation misconduct”. The third issue, representation and escalation of costs, was an essentially amplified repetition of this central submission.

During the interlocutory process of the financial proceedings litigation, an issue arose as to the valuation of the Claimant’s pension. Papers disclosed by or on behalf of the Claimant failed (at least initially) to include a Cash Equivalent Value, and it seems that the submission contributed to some confusion or protraction of the proceedings. The Claimant cited a paragraph from the Respondent’s s.25 statement suggesting that had a CEV been provided earlier, it may not have been necessary to pursue whether it was possible to serve a pension order in Ireland. It was submitted that the omission was an error and that this mistake, in turn, contributed to the unreasonable inflation of costs.

The Claimant submitted that the arrangement whereby his legal costs were largely paid or indemnified by Mr Garry Moore, his brother-in-law, contrasted with the run of the mill case and justified a detailed assessment.

The Defendant submitted that the Claimant’s special circumstances submissions “do not bear scrutiny”. The fees, expenses and disbursements were incurred on the instruction of the Claimant who, like his ex-wife, was determined to pursue the litigation “to the bitter end”. At all times the Claimant knew about the costs that he was incurring, as he was being billed monthly (or at least very regularly), and he latterly had regular conversations with the firm about costs. The fact that the costs incurred may be held to be disproportionate on an inter partes evaluation is of little or no relevance to a Solicitors Act detailed assessment, as the bill is assessed on the indemnity basis. The Claimant made no contemporary criticism of his legal representation by the Defendant. His subsequent allegations were unpersuasive, as demonstrated by the fact that he was willing to enter (or re-engage) in four retainers, culminating in an agreement dated 24 March 2025. There was no evidence at all to suggest that the Defendant’s work for the Claimant was inadequate and that this led to the unreasonable inflation of his costs liability. Insofar as the pension issue was concerned, the error was essentially that of the Respondent, for failing to acknowledge or accept that a foreign (Irish) pension could never have been made subject to a pension sharing order by an English court. The escrow account was a necessary security against non-payment by the Claimant, in circumstances where the Defendant would not have continued to act without such a guarantee of reasonably prompt payment. The arrangement was endorsed enthusiastically by the parties—the Claimant, Mr Moore and the Defendant—and it was conceded that monies drawn down on this account constituted “payments” for the purposes of the SA 1974. There was no credible or sustainable suggestion that these payments were in any way unauthorised.

The Defendant further submitted that a number of additional points militated against the court exercising the discretion in favour of the Claimant. Throughout the period of his representation, the Claimant gave repeated assurances to the Defendant that his costs would be paid, assurances which encouraged the Defendant to continue to act on his behalf, particularly after January-March 2025, when the firm had come off the court record. The Claimant was a capable litigant in person who exhibited a clear understanding of time limits; he started the Part 8 claim himself. The fact that his substantive costs were underwritten by Mr Moore suggested that he may ultimately struggle to satisfy any order for costs made following ongoing assessment proceedings.

Decision on Special Circumstances

Costs Judge Whalan was not satisfied that the Claimant had demonstrated the existence of special circumstances. There was nothing, in the court’s conclusion, that “calls for an explanation” or the scrutiny of the court. Pursuant to the retainers, the Defendant delivered regular, itemised invoices that exhibited very detailed breakdowns of the profit costs, expenses and disbursements that the Claimant had incurred during each relevant period. These costs were incurred pursuant to his instruction and he was aware of his ongoing, accumulating liability. Most of the invoices delivered by the Defendant were paid, within the meaning of the SA 1974.

Although the substantive parties’ costs may well have been incurred (individually and collectively) to a level that was disproportionate inter partes, that was of no general relevance to a solicitor/client assessment, which proceeds on the indemnity basis. This distinction between inter partes proportionality and indemnity basis assessment was the key reason why the judge found the judicial criticism of costs levels irrelevant to the special circumstances analysis. It was hard to foresee that the presumption of reasonableness would be dislodged on the particular facts of this case. No identifiable or sustainable criticism was made of the Defendant during the period(s) of representation, and the fact that the Claimant was content to be represented by the firm was illustrated by his willingness to re-engage the Defendant after March 2025. This absence of contemporary criticism and the Claimant’s voluntary re-engagement directly undermined his retrospective complaints about representation quality and cost escalation.

Insofar as special circumstances were not demonstrated, it followed that the court could not exercise its discretion to order the detailed assessment of the 3 invoices 211203 (18 July 2024), 211953 and 211946 (31 July 2024). Insofar as the remaining 15 disputed invoices were concerned, it was not appropriate, having regard to the matters set out in paragraphs 29 and 30 of the judgment (including the Claimant’s repeated assurances of payment, his sophistication as a litigant in person, and the potential difficulty in satisfying any costs order), for the court to exercise discretion to order a detailed assessment.

Conclusion

The court concluded that the retainers concluded by the Claimant and the Defendant provided for the delivery of interim statute bills. The invoices delivered by the Defendant to the Claimant between 25 August 2023 and 7 August 2025 were interim statute bills. The Claimant was not entitled to an assessment of the invoices that were delivered and paid between 25 August 2023 and 27 June 2024. The Claimant was not entitled to an assessment of the invoices delivered and paid/part-paid dated between 18 July 2024 and 29 May 2025. There were no special circumstances arising in this case and, at the discretion of the court, a detailed assessment was refused. The Claimant was—by concession and agreement—entitled to a detailed assessment of two invoices, 225141 (27 June 2025) and 226664 (7 August 2025), should he wish to pursue this.

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The Senior Courts Costs Office’s decision in Tucker & Anor v Howe [2026] EWHC 208 (SCCO) addresses two consequential issues arising from a nine-day detailed assessment of the costs of an estate administrator appointed under probate proceedings.

Background

The matter concerned the detailed assessment of costs under section 71(3) of the Solicitors Act 1974. The costs were those of Mr Mark Keeley, a solicitor and partner at Freeths LLP, who had been appointed as administrator pending suit of the estate of the late Mr Steven Howe. The appointment was made by order of HHJ Pearce on 16 October 2020 within probate proceedings brought by the executrices (the Claimants) to propound Mr Howe’s will against his daughter, the Defendant. Mr Keeley’s appointment authorised him to charge reasonable professional fees and terminated upon the final order in the probate claim.

The probate claim was compromised by a consent order in December 2021. Disputed matters of administration were later resolved by a further consent order made by District Judge Woodward on 21 February 2023. That order provided for the determination of the Administrator’s costs by way of a third-party detailed assessment pursuant to section 71(3) of the 1974 Act, setting out a timetable for the service of a bill, points of dispute, and the commencement of assessment proceedings in the Senior Courts Costs Office if agreement was not reached. The bill for assessment, served pursuant to that order, was drawn in the total sum of £147,436.33 across twelve parts, covering both contentious and non-contentious work under two separate contracts of retainer, together with Mr Keeley’s own professional time costs and counsel’s fees.

The assessment hearing took nine days of court time over three separate periods between April 2024 and February 2025. That duration was largely the result of 67 pages of Points of Dispute which employed the word “staggering” or “staggeringly” 54 times and the word “astonishing” 17 times. The court found none of that hyperbole justified. The bill was assessed at £129,686.76, just below 88% of the amount claimed. The court found the Claimants’ conduct to have been unreasonable to a high degree and ordered them to pay the costs of the assessment on the indemnity basis, summarily assessed at £132,400 exclusive of VAT.

The parties were unable to agree the terms of a final order, leading to a further hearing on two unresolved issues: whether the Claimants or the estate should bear the costs of the assessment, and the recoverability of VAT on those assessment costs. The question of costs liability had taken on particular significance because the estate of Mr Howe was insolvent, an Insolvency Administration Order having been made on 23 July 2025.

Costs Issues Before the Court

Two discrete costs issues required determination. The first was the identity of the party liable to pay the costs of the detailed assessment proceedings. The Claimants argued the burden should fall on the insolvent estate, while Mr Keeley contended the Claimants were personally liable in their capacity as beneficiaries who had applied for the assessment. The second issue was whether Value Added Tax was properly recoverable on the costs of the assessment, with the Claimants arguing that the work constituted a non-taxable self-supply by Freeths.

The Parties’ Positions

On the burden of costs, Professor Watson-Gandy submitted for the Claimants that the central consideration in a section 71(3) assessment was the protection of the estate’s interests, relying on Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15. He argued that the Claimants had participated in their capacity as executrices fulfilling a fiduciary duty to the beneficiaries. He submitted that DJ Woodward’s consent order made no provision for personal liability and that CPR 46.2, which governs costs orders against non-parties, would have been required if such liability was intended.

Mr Latham argued for Mr Keeley that the Claimants had clearly applied for and pursued the assessment in their capacity as beneficiaries, a point reinforced by their own pre-action correspondence and by the legal arguments they had advanced to broaden the scope of the assessment. The Claimants’ representative, Mr Valls, had consistently corresponded on behalf of all the beneficiaries and demanded a detailed assessment in that capacity. The court retained an absolute discretion under section 51 of the Senior Courts Act 1981 and section 71(3)(b) of the 1974 Act. Given the court’s findings on the Claimants’ unreasonable conduct — conduct not attributable to the estate or the beneficiaries as a whole — it was appropriate to order the Claimants to pay the costs personally.

On VAT, Professor Watson-Gandy argued that where solicitors act for themselves in contentious business matters, the supply is not a taxable supply, citing the VAT tribunal decisions in Ralph Arthur Archer v The Commissioners and D A Walker v The Commissioners. It was submitted that Freeths’ bills were addressed to Mr Keeley at Freeths, and that estate accounts bore Freeths’ business address, indicating a self-supply. Mr Latham submitted that the point had not been raised in the Points of Dispute against the main bill and should not be permitted to be raised after the assessment had concluded. On the merits, he argued that Mr Keeley and Freeths were separate legal entities capable of entering into a retainer and that VAT was properly chargeable on Freeths’ supply of services to him.

The Court’s Decision

Burden of the Costs of Assessment

Costs Judge Leonard held that the Claimants were personally liable for the assessment costs in their capacity as beneficiaries. The court rejected the argument that they had acted as executrices, for several reasons. The Claimants had made it clear from the outset that they were acting as beneficiaries. They had relied extensively upon their position as beneficiaries to broaden the scope of their challenges to Mr Keeley’s costs. And the statutory jurisdiction under section 71(3) does not empower the court to order an assessment on the application of a trustee, executor or administrator; it empowers the court to do so on the application of any person interested in the relevant property — in this case, the beneficiaries of Mr Howe’s will.

The description of the Claimants as executrices in the heading of the proceedings and other procedural documents reflected the proper title of the probate proceedings in which the consent order was made. It had no bearing on the substance of the order or the capacity in which the assessment was pursued. The court held that CPR 46.2 had no application because the Claimants were already parties to the assessment proceedings, not non-parties. DJ Woodward’s order made no provision for the costs of the assessment because orders for assessment do not make such provision; the award and quantification of those costs was a matter for the assessing judge.

Even if the court was wrong on any of those points, it accepted Mr Latham’s submissions on the appropriate exercise of discretion. The Claimants had, without ever themselves making any attempt at negotiation, rejected three attempts by Mr Keeley to settle the costs dispute upon receipt of a smaller sum than he was ultimately found to be due on assessment. Had they engaged with those settlement attempts, it would have been possible to avoid the necessity for the court to spend nine days reducing the bill by less than £18,000 inclusive of VAT. It would be unfair for the estate, and potentially for Mr Ross Tucker and Mr Jamie Tucker (who did not participate in the assessment), to bear any part of the burden of the unnecessary costs incurred through the Claimants’ actions.

Recoverability of VAT

The court first held that the Claimants were barred from raising a VAT challenge to the main bill itself, having failed to raise the point in their Points of Dispute. CPR 47.14(6) provides that only items specified in the points of dispute may be raised at the hearing unless the court gives permission, and no such permission had been sought or granted.

On the substantive question of VAT on the costs of the assessment, the court found no basis for the self-supply argument. Mr Keeley and Freeths LLP are separate entities capable of entering into a contract of retainer. Freeths had provided services to Mr Keeley under two contracts of retainer, and VAT was payable on their charges in the usual way. The termination of Mr Keeley’s appointment as administrator did not affect this analysis. On Mr Keeley’s own time costs (Part 10 of the bill), the court held there was no question of self-supply because his services as administrator were supplied to the estate, not to himself. As for the costs of the assessment, Mr Keeley had been represented by counsel instructed by Freeths; he was not representing himself. He had a liability to Freeths for the attendant costs, and they had an obligation to add VAT to their fees and disbursements. The inclusion of Freeths’ address on bills or estate accounts was not to the point.

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The Senior Courts Costs Office’s decision in Griffin v Kleyman & Co Solicitors Ltd [2026] EWHC 257 (SCCO) clarifies that a settlement offer which attempts to reverse the statutory one-fifth rule through CPR Part 36 mechanics will not constitute a “special circumstance” under section 70(10) of the Solicitors Act 1974.

Background

The case concerned an assessment, under section 70 of the Solicitors Act 1974, of bills totalling £181,954.64 (including VAT and disbursements) rendered by the defendant firm, Kleyman & Co Solicitors Ltd, to its former client, Clare Griffin [§1]. The bills related to work undertaken between 30 March 2020 and 28 May 2021 [§1]. The assessment was ordered by consent on 13 May 2022 following a Part 8 application made by Ms Griffin on 30 July 2021 [§1]. That Part 8 application had initially been opposed, with a one-day hearing listed on 18 May 2022 to determine whether an order should be made, but that hearing was rendered unnecessary by the consent order agreed five days earlier [§2].

The consent order incorporated, at paragraph 2, the standard provision taken from Precedent L to Practice Direction 47 requiring the court to assess both the bills and the costs of the Part 8 proceedings, reserving the award and quantification of costs to the conclusion of the assessment process [§3–4]. The detailed assessment was a lengthy process. The claimant’s case on estimates was heard as a preliminary issue but did not succeed; Costs Judge Leonard found that whilst the defendant had failed to advise adequately on estimates, the claimant’s own refusal to conduct herself in a reasonable, realistic and cost-effective fashion made it impossible to set a limit upon the defendant’s recoverable costs [§12]. A final figure for the assessed bill was not established until 7 July 2025, with the process hampered by errors and misunderstandings on both sides [§13].

The bills, originally totalling £181,954.64, were assessed at £154,039.94, a reduction of £27,914.70 (15.34%) [§5]. As Ms Griffin had already paid £174,309.82, a refund of £20,269.88 was due to her [§5]. Importantly, it was established during the assessment that the defendant had incorrectly included in its bills disbursements to the value of £4,334.10, meaning the bills should have totalled £177,620.54 rather than £181,954.64 [§24]. Even without any other deduction, the defendant could never have claimed more than £3,310.72 as an outstanding balance, and the sum of £10,452.82 it had asserted as owing was substantially overstated [§24].

Costs Issues Before the Court

The primary issue was the award of costs for the solicitor-client assessment. The statutory framework in section 70(9) of the Solicitors Act 1974 prescribes that, unless the order for assessment provides otherwise, costs follow the “event” based on a one-fifth rule: if the bill is reduced by one-fifth or more, the solicitor pays the costs; if the reduction is less than one-fifth, the client pays [§7]. As the reduction was 15.34%, section 70(9) dictated that the defendant should receive its assessment costs unless special circumstances under section 70(10) justified a different order [§8].

This presumption could be displaced by section 70(10), which empowers the costs officer to certify special circumstances and the court to make such order as to costs as it sees fit [§7]. The claimant argued that a settlement offer she made constituted such a special circumstance. A secondary issue was the award of costs for the separate Part 8 application, the costs of which were reserved by the consent order and fell to be determined under the court’s general costs discretion in CPR 44.2 [§30].

Settlement Offers

Both parties accepted, for the purposes of this decision, that CPR Part 36 has no application to an assessment under section 70 of the 1974 Act. Costs Judge Leonard had previously given his reasons for reaching that conclusion in Zuhri v Vardags Ltd [2023] EWHC 3050 (SCCO), and neither party wished to reopen that point [§18]. The key part of the rationale behind that earlier decision was that the costs provisions of CPR Part 36 (as secondary legislation) are inconsistent with the costs provisions of subsections (9) and (10) of section 70 (as primary legislation) [§19]. There was, however, no obstacle to an offer not carrying Part 36 consequences being accepted so as to create a binding contract of settlement [§20].

On 23 May 2022, ten days after the assessment order, the claimant sent an offer headed “Part 36 Offer To Settle” proposing that the defendant’s bills be reduced by £28,000 in full and final settlement [§22]. The offer expressly stated it was intended to have Part 36 consequences and that, if accepted, the defendant would be liable for the claimant’s costs under CPR 36.13 [§22]. After deducting the £10,452.82 the defendant claimed as outstanding, the payment to the claimant would have been £17,547.18 [§22].

The defendant responded on 6 June 2022, questioning why the offer was “plus costs” given that a £28,000 reduction was less than the 20% needed to trigger the one-fifth rule in the claimant’s favour [§23]. The defendant offered instead to settle on a “drop hands” basis with no order as to costs, the outstanding balance of £10,452.82 to be written off [§23].

The Court’s Decision on Special Circumstances

Costs Judge Leonard found that the claimant’s 23 May 2022 offer was not sufficient to establish special circumstances displacing the one-fifth rule [§48]. The court accepted that, on the authority of Angel Airlines SA v Dean & Dean [2008] EWHC 1513 (QB), a clear without prejudice offer made in proper time and in proper form can constitute a special circumstance capable of reversing the statutory presumption in section 70(9) [§15, §32]. The judge accepted that the general principle from Wills v Crown Estate Commissioners [2003] 4 Costs LR 581 — that paying parties should make realistic settlement offers at the beginning of assessment proceedings and not at the end — was of general application to solicitor-client assessments as well as inter-party assessments, as recognised in Angel Airlines [§16–17].

However, the judge found the claimant’s offer was not in “proper form” [§35]. The offer provided for a reduction of less than one-fifth of the bills, yet required that, on acceptance, the defendant would lose its section 70(9) right to recover its assessment costs and would instead pay the claimant’s costs by reference to CPR 36.13(1) [§36]. In short, the offer represented a misconceived attempt to reverse the effect of section 70(9) through the operation of CPR Part 36, which was not possible [§37]. The judge found it unsurprising that the defendant was unwilling to accept it, and regarded the defendant’s “drop hands” offer as a more sensible proposition [§38].

The court also rejected the argument that accepting the offer would have left the defendant in a better position. While the billing refund under the offer (£17,547.18) was £2,722.70 less than the eventual refund of £20,269.88, acceptance would have required the defendant to pay the claimant’s costs — estimated at least £10,400 based on document time alone — and to forfeit its right to its own costs under the one-fifth rule [§27, §42–43]. The judge observed that the great majority of solicitors’ bills are reduced at least to some extent on a section 70 assessment, particularly in lengthy retainers involving hard-fought contentious matters, and that a solicitor whose costs are reduced by less than one-fifth may nonetheless regard the outcome as a success if it retains the right to assessment costs [§40]. The preservation of those rights, even subject to an element of uncertainty, outweighed the reduction of the billing refund by £2,722.70, or was at least sufficient to prevent the claimant from relying on the offer as establishing special circumstances [§47].

The judge added that even had he reached a different conclusion on special circumstances, it was unlikely that the claimant could have been awarded the costs of the estimates issue. The claimant’s case on estimates had been overstated and had involved unfounded and unfair allegations of impropriety against the defendant’s principal, Ms Kleyman, which the judge described as “regrettable”. Even after the estimates issue had been determined, the unfounded attacks on Ms Kleyman remained a feature of the proceedings [§49–50].

Conduct and the Award of Assessment Costs

The court awarded the defendant its costs of the assessment under the one-fifth rule, but reduced those costs to 80% to reflect the defendant’s conduct [§57].

The principal factor was the defendant’s negligent overbilling by £4,334.10, which should never have occurred [§53]. The claimant also identified a wider pattern of poor financial management: the defendant failed to produce a cash account as required by the assessment order in May 2022, failed again when ordered on 11 December 2024, and did not finalise a cash account until June 2025, even with some assistance from the claimant’s costs draftsman [§54]. The court found this poor record-keeping had impeded the clarification and resolution of the assessment, and that it should never have been necessary for the claimant to engage in a detailed assessment to discover that she had been overbilled [§55–56].

The Part 8 Costs

The Part 8 application and the assessment costs are distinct: section 70(9) governs only the costs of assessment, while the Part 8 costs fall to be determined under CPR 44.2 [§30]. However, there was logic in the parties’ mutual assumption that the Part 8 costs would follow the assessment costs, since the Part 8 claim was part and parcel of the claimant’s attempt to reduce the defendant’s bills [§31, §58].

The claimant argued she should receive the Part 8 costs on the basis that the defendant had initially opposed her application and only conceded shortly before the hearing. The court did not characterise the consent order as a capitulation, finding instead that it was a sensible compromise to have all disputes resolved within the assessment process [§59–60]. Nevertheless, the defendant could have recognised this at the outset rather than waiting until shortly before the hearing. In the exercise of discretion, the court ordered the claimant to pay 50% of the defendant’s Part 8 costs [§61].

Key Takeaway

This decision reinforces that settlement offers in Solicitors Act assessments must be crafted within the statutory framework, not around it. An offer which attempts to import CPR Part 36 consequences into a section 70 assessment — and which seeks to reverse the one-fifth rule through the backdoor — will fail the “proper form” test from Angel Airlines and will not constitute a special circumstance under section 70(10). Practitioners making settlement offers in solicitor-client assessments should ensure they do not attempt to reverse statutory costs entitlements, should make offers early and in realistic terms, and should be aware that a “drop hands” offer may carry more weight than an ambitious offer encumbered by misconceived Part 36 conditions. Separately, solicitors face tangible costs penalties for overbilling and poor record-keeping even where they prevail on the one-fifth rule.

Monthly Costs Law RoundUp | January 2026

Fixed & Predictable Costs, Monthly Newsletter, New Costs Blog, Part 36, Payment on Account, Solicitor & Client Costs

Costs Orders, Assessment & Payments on Account

VAT On Costs In Liquidation | Moller & Ors v One Touch Solution Ltd (08/01/2026)

HHJ Pearce held that a receiving party in creditors’ voluntary liquidation could recover VAT on assessed costs, as Regulation 111(5) of the VAT Regulations 1995 permits post-deregistration VAT recovery by the estate via liquidators. However, the paying party was not liable for VAT where no actual loss was suffered, with the court drawing a careful distinction between insured and insurer for input tax purposes.

Reserved Costs of Interim Applications Determined at Trial | Gable Insurance AG v Dewsall & Others (08/01/2026)

Deputy Judge Robin Vos determined the reserved costs of interim applications including freezing orders, search orders and contempt proceedings following trial. Applying the Dos Santos v Unitel principles, the court held that the trial outcome remained a relevant factor when costs had been reserved, awarding indemnity costs where a party had relied on a discredited investigative report and making cross-orders reflecting the differing outcomes on each application.

Summary Assessment | Disproportionate Costs Reduced and Recovery Halved for Aggressive Conduct (15/01/2026)

Mr Justice Pepperall reduced claimed costs of £61,366 related to a strike out application to £12,000 on summary assessment, finding them disproportionate, with recovery further limited to 50% due to the claimants’ aggressive conduct in breach of CPR 1.3. The court warned that the parties’ combined budgets of £12.7 million were “enormous” and should not be expected to receive approval at those levels.

“Extraordinarily High” Costs With “Paucity Of Information” Result In £43 Million Payment On Account (21/01/2026)

Mrs Justice O’Farrell DBE ordered a payment on account of £43 million from a £189 million costs claim in the Fundão dam litigation, adopting a cautious approach given the limited supporting evidence. The court stripped out over £109 million in sign-up and collateral costs, applied a 10% reduction for issues lost and awarded pre-judgment interest on costs under CPR 44.2(6)(g).

Costs Procedure & Case Management

Non-Party Costs Order Against Secured Creditors Who Funded Insolvent Company’s Failed Claim (13/01/2026)

HHJ Stephen Davies made a non-party costs order under s.51 Senior Courts Act 1981 against secured creditors who funded an insolvent company’s failed construction claim. Applying Dymocks and Goknur, the court treated the creditors as the “real parties” to the litigation, ordering them to pay a further £995,000 beyond £583,000 in security already provided, holding that the provision of security for costs does not cap non-party costs liability.

CPR 3.14 | Relief From Sanctions Refused After Late Costs Budget (15/01/2026)

Recorder Singer KC refused relief from sanctions after a limited company failed to file its costs budget by the CPR 3.14 deadline, restricting future recoverable costs to court fees only. Applying the Denton three-stage test, the court held that the solicitors’ withdrawal did not constitute good reason, and that an unrepresented limited company remains subject to budgeting requirements unlike a litigant in person.

Hospira Three-Question Test Applied in Multi-Claim IP Litigation (15/01/2026)

Mrs Justice Joanna Smith DBE applied the Hospira v Novartis three-question framework to determine costs following mixed success in multi-claim IP litigation. The defendant was identified as the overall winner despite the claimants’ partial success on trade mark infringement, with the late abandonment of three substantial claims resulting in a net reduction of 30.6% from the defendant’s costs recovery and payments on account at 90% of budgeted and 70% of incurred costs.

Solicitor-Client Costs & Retainers

Fixed Recoverable Costs Irrelevant to Solicitor-Client Assessment (18/01/2026)

Senior Costs Judge Rowley held that fixed recoverable costs are irrelevant to solicitor-client assessment under the Solicitors Act 1974 and the Non-Contentious Business Remuneration Order 2009. The court endorsed the SGI Legal v Karatysz “step back” methodology, confirming that the “swings and roundabouts” fairness rationale applies only inter partes and that contractual terms govern the solicitor-client relationship.

CFA Termination | Accepting Repudiation Instead Of Using Contractual Rights Left Solicitor With Nothing (19/01/2026)

Mr Justice Marcus Smith upheld a nil assessment of a solicitor’s bill where the firm accepted a client’s repudiatory breach rather than relying on its contractual termination clause. Applying Dargamo Holdings and Barton v Morris, the court held that the contractual risk allocation in CFAs precludes restitutionary claims, and that quantum meruit is available only as a “last resort” where the contract does not already address the scenario.

Unless Order Stands | Defendants Fail To Evidence Impecuniosity After Non-Payment Of Interim Costs (26/01/2026)

Costs Judge Nagalingam dismissed an application to discharge an unless order following non-payment of a £741,122.85 interim costs order in solicitor-client proceedings. Applying Tibbles and the Denton principles, the court held that impecuniosity must be supported by “detailed, cogent and proper evidence” per Michael Wilson v Sinclair, with the defendants’ ability to secure €200,000 for legal representation undermining their claim of inability to pay.

Inadequate Estimate Fails To Establish Special Circumstances Under s70(3) (27/01/2026)

Costs Judge Leonard refused an application for assessment of 19 solicitor’s bills totalling £195,954.60, finding no special circumstances under s.70(3) of the Solicitors Act 1974. The initial estimate of £10,000–£15,000 was expressly preliminary and superseded, and the client’s conduct — including seeking £1.3 million in litigation funding and expressing a preference to stay with the firm — demonstrated they would have made the same choices regardless of updated estimates.

Trust & Estate Costs

Executors Lose Estate Indemnity After Hostile Removal Litigation (19/01/2026)

HHJ Paul Matthews held that executors who defended removal proceedings in their own interests rather than for the estate’s benefit lost their entitlement to indemnity under Trustee Act 2000 s.31. Indemnity costs were awarded against the executors personally, the court applying Excelsior for “out of the norm” conduct including self-dealing, delay in administration and accelerating a property exchange to pre-empt an injunction.

Does Removal As Trustee Always Mean Loss Of Indemnity? (29/01/2026)

Deputy Master Holden held that trustees removed on hostility grounds retained their right to indemnity from the trust fund. Applying Price v Saundry, the court found the trustees’ costs were properly incurred through reasonable defence of dismissed misconduct allegations and a good-faith early settlement proposal, whilst making no order as to costs between the parties due to the claimants’ unreasonable conduct in pursuing exaggerated allegations without pre-action correspondence.

Part 36 & Fixed Recoverable Costs

Part 36 Liability Offers | Mundy Overruled by the Court of Appeal (19/01/2026)

The Court of Appeal (Bean LJ, Phillips LJ, Stuart-Smith LJ) overruled Mundy v TUI UK Ltd, holding that CPR 36.17(4) enhanced costs consequences for Part 36 liability-only offers require an actual determination of liability rather than a global settlement. A 90:10 liability split remains valid in principle following Huck v Robson, and a court-approved settlement under CPR 21.10 constitutes “judgment” for Part 36 purposes.

Wrongful Interference With Goods Against Police Mandates Multi-Track Allocation | Part 36 Acceptance Does Not Oust Fixed Costs (31/01/2026)

Costs Judge Whalan held that a claim against the police for wrongful interference with goods fell within CPR 26.9(10)(e)(i) as it included an intentional tort, mandating multi-track allocation and excluding fixed recoverable costs. The court also held (obiter) that Part 8 costs-only proceedings issued after 1 October 2023 trigger FRCs for legacy settlements, and that Part 36 acceptance does not constitute “contracting out” under CPR 45.1(3).

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Inadequate Estimate Fails To Establish Special Circumstances Under s70(3) Where Client Would Have Made The Same Choices

Criminal Costs, New Costs Blog, Solicitor & Client Costs

The Senior Courts Costs Office’s decision in Biggar v Howard Kennedy LLP [2026] EWHC 132 (SCCO) confirms that deviation from a preliminary estimate will not establish special circumstances where the client’s conduct demonstrates they would have made the same choices regardless.

Background

Mr Alan Biggar made an application under section 70 of the Solicitors Act 1974 for the detailed assessment of 19 bills of costs delivered to him by his former solicitors, Howard Kennedy LLP [§1]. The bills, rendered between 29 June 2020 and 28 July 2023, totalled £195,954.60 [§1]. The Defendant’s records indicated that the first three bills, up to 26 August 2020, had been paid in full [§1]. The remaining bills were wholly or partly unpaid.

The Defendant had acted for the Claimant between June 2020 and June 2023 in connection with serious charges of fraudulent trading brought by the Financial Conduct Authority (FCA) relating to Worthington Group plc, a company listed on the London Stock Exchange [§5–6]. A restraint order, made on 13 April 2018 by HHJ Taylor at Southwark Crown Court, prevented the Claimant and his wife from dealing with their assets and did not contain an exception for legal fees [§10]. The retainer was governed by an engagement letter dated 12 June 2020 and the firm’s standard terms of business [§7]. The letter included a preliminary estimate of £10,000–£15,000 plus VAT for initial work (reviewing papers, liaising with the FCA, and providing initial advice), stating that further estimates would be provided as the matter progressed [§8–9].

The Claimant faced significant difficulties in funding his defence. An initial third-party funder, Mr Stephen Dando, withdrew in May 2021 [§19]. The Claimant’s estranged wife contributed £10,000 in October 2021 but was unable to provide further funding [§20]. Subsequent promises of funding from Anglo Swiss Advisory Ltd, outlined in a letter dated 14 October 2022, failed to materialise [§24–25]. That letter contemplated funding of at least €1,320,000 [§24]. Despite mounting unpaid fees, the Defendant continued to act. In July 2023, the parties entered a written agreement in which the Claimant acknowledged a debt of £101,137.42 and agreed to a repayment plan [§33]. The plan was not honoured [§34].

On 22 May 2024, the Defendant issued County Court proceedings for unpaid fees totalling £102,109.40 plus interest [§35]. The Claimant filed a defence challenging the reasonableness of the fees and sought an order for detailed assessment [§35]. Shortly thereafter, on 9 January 2025, he issued a Part 8 application in the Senior Courts Costs Office [§36]. On 15 January 2025, HHJ Evans-Gordon stayed the County Court proceedings pending the conclusion of the assessment claim [§36].

Costs Issues Before the Court

The court was required to determine two principal issues [§4]. First, whether the Defendant’s first three bills had been “paid” for the purposes of section 70 of the Solicitors Act 1974. If they were paid more than 12 months before the application, the court had no jurisdiction to order their assessment under section 70(4) [§3]. Second, whether “special circumstances” existed to justify an order for the assessment of the remaining unpaid bills. As the application was made more than 12 months after the delivery of those bills, the Claimant needed to demonstrate special circumstances to overcome the statutory restriction in section 70(3) [§3].

The Parties’ Positions

The Claimant’s Position: The Claimant argued that special circumstances existed. He contended that the existence of the restraint order was itself a special circumstance sufficient to justify assessment [§48]. He relied heavily on the Defendant’s initial cost estimate of £10,000–£15,000, arguing that the eventual fees of nearly £200,000 represented such a significant deviation as to call for an explanation [§51]. He stated he had relied on this estimate and was vulnerable when instructing the Defendant [§37, §51]. He also cited his involvement in a lengthy criminal trial as a factor explaining his delay in challenging the bills [§52]. Regarding payment, he submitted that, applying Menzies v Oakwood [2024] UKSC 34, he had not agreed to the allocation of specific payments to specific bills, and therefore the first three bills could not be considered “paid” [§53].

The Defendant’s Position: The Defendant submitted that the application was a tactical manoeuvre to delay payment [§54]. It argued that the first three bills had been paid by agreement, which could be inferred from the Claimant’s conduct in making payments against the outstanding balance over a prolonged period [§55–58]. On special circumstances, the Defendant contended the preliminary estimate was just that — preliminary — and was quickly superseded by events [§61]. It highlighted that the Claimant had later sought to raise over €1.3 million in funding, demonstrating his understanding of the true potential cost [§61]. The Defendant pointed out that the Claimant had repeatedly affirmed the debt, including in the July 2023 agreement, and had never queried the bills until faced with enforcement [§59–60]. It argued there was nothing out of the ordinary in a complex fraud case with a restraint order [§62].

The Court’s Decision

On Payment of Bills: Costs Judge Leonard found that the first three bills had been paid [§67]. Applying the principles from Menzies v Oakwood, the judge held that payment requires an agreement to the sum taken, which can be inferred from conduct [§63]. The Claimant had received the bills and subsequently arranged for payments to be made against the outstanding balance. This constituted an agreement to pay [§67]. The judge rejected the argument that agreement required specificity in allocating payments to particular bills, finding that standard to be artificial and impracticable [§66]. Consequently, the court had no jurisdiction to order assessment of those bills under section 70(4).

On Special Circumstances: The court dismissed the application, finding no special circumstances [§89].

The judge rejected the argument based on the initial estimate [§69]. The estimate was expressly preliminary and related only to initial work: reviewing papers, contacting the FCA and previous solicitors, and providing advice [§69]. The Claimant’s comparison of this figure to the total three-year costs was “artificial” [§69]. The judge noted that by October 2022, the Claimant was seeking to raise over €1.3 million, showing his understanding of the potential scale of costs [§77]. Furthermore, the evidence demonstrated that even with full knowledge of accruing costs, the Claimant wished to continue instructing the Defendant rather than seek cheaper alternatives. In March 2023, having already received bills exceeding £170,000, he emailed: “I’d rather of course stay where we are. I value your guidance and as we’ve said before when liberty is at stake its not a time to go for the cheapest” [§29, §73]. Accordingly, any failure to provide updated estimates had not caused the Claimant to lose an opportunity to make different choices [§76].

The court also rejected the other proposed special circumstances. The restraint order was not unusual for a substantial fraud prosecution [§80, §83]. The Defendant’s subsequent enforcement action was a reasonable consequence of unpaid fees and broken promises [§84]. The Claimant’s ongoing criminal trial did not adequately explain a 17-month delay in applying for assessment, especially as the trial did not begin until September 2024 — well after most of the delay had elapsed [§81]. The judge also found that the Defendant had complied with its retainer terms regarding notification of rate increases by detailing them on each invoice [§86]. In any event, such a discrete point would not justify a full assessment [§88].

In concluding, Costs Judge Leonard accepted the Defendant’s submissions as to the merits and motivation behind the application [§68]. The Claimant had been advised from the outset of his right to challenge bills and the applicable time limits, was reminded of this with every bill, and never expressed dissatisfaction until faced with enforcement [§79]. The Part 8 application was dismissed [§89].

What Might Amount To “Special Circumstances” Under s70(3) Of The Solicitors Act 1974?

s70 Solicitors Act 1974 | What Amounts To “Payment” When Transferring Client Funds

Solicitors Act 1974 | Part Payments, Delay And Special Circumstances

Solicitors Not Held To “Inadequate” Costs Estimate

The Consequences Of Exceeding A Costs Estimate

Costs Estimates And The Relevance Of A Costs Budget As Between Solicitor And Client

Unless Order Stands | Defendants Fail To Evidence Impecuniosity After Non-Payment Of Interim Costs

New Costs Blog, Payment on Account, Relief from Sanctions, Solicitor & Client Costs

The Senior Courts Costs Office’s decision in Fieldfisher LLP v Scherbakova & Anor [2026] EWHC 104 (SCCO) confirms that parties seeking relief from unless orders on grounds of impecuniosity must adduce proper evidence, not rely on inference.

Background

The Claimant, Fieldfisher LLP, provided legal services to the Defendants, Olga Scherbakova and Alexander Scherbakov, in relation to a contentious probate claim concerning their late father’s estate, under engagement letters dated December 2022 and January 2023 [§3, §5]. The Defendants ceased instruction in August 2023 [§7]. During the retainer, the Claimant issued invoices totalling £1,944,078.48, of which a substantial balance remained unpaid [§8].

The Claimant commenced proceedings to recover the unpaid fees as a debt [§9]. In their Defences, the Defendants admitted liability to pay costs subject to reasonableness [§20–21]. On 2 December 2024, HHJ Pearce entered judgment for the Claimant for an amount to be decided and transferred the matter to the Senior Courts Costs Office for “damages to be assessed” [§48]. A directions order on 29 April 2025 set a timetable for the assessment of the disputed fees, adopting a procedure akin to CPR 46.10 by analogy, though the proceedings were not brought under the Solicitors Act 1974 [§10–12, §24].

The Claimant’s application for an interim payment was heard on 7 July 2025 [§25]. The Defendants opposed it, alleging impecuniosity, but the court was not persuaded by the evidence provided [§28–30]. Costs Judge Nagalingam ordered the Defendants to pay an interim payment on account of £741,122.85 by 5 August 2025, with summarily assessed costs of £20,000 [§33]. The judge regarded this sum—approximately 50% of the outstanding balance—as modest [§30–32].

The Defendants did not pay, apply to vary, or appeal this order [§34]. On 12 August 2025, the Claimant applied for an unless order [§35]. The Defendants said they would be unrepresented due to a lack of funds and did not attend the hearing on 1 September 2025, instead submitting written representations—a course the court later characterised as a choice rather than a necessity [§37, §142]. The court made an unless order requiring payment by 22 September 2025, failing which the Defences would be struck out and judgment entered for the full claimed sum plus interest [§42]. The Defendants again did not pay by the deadline, instead issuing the present application on 22 September 2025 [§43].

Costs Issues Before the Court

The Defendants’ application, as refined at the hearing, raised three core costs issues for determination [§2, §191]. First, whether the unless order dated 1 September 2025 should be discharged pursuant to the court’s general case management powers under CPR 3.1(7). Second, and alternatively, whether the Defendants should be granted relief from the sanctions imposed by that unless order under CPR 3.9. Third, whether the interim payment order should be varied under CPR 25.20(6) to account for security the Claimant allegedly held over the Defendants’ Belgian properties, a route which the Defendants argued could also lead to the discharge of the unless order. The Defendants had abandoned their request for permission to appeal [§189].

The Parties’ Positions

The Defendants’ Position: The Defendants contended that enforcing the unless order would cause unjust enrichment, as the Claimant would recover the full invoice value without undergoing an assessment that would likely result in significant reductions [§65–66]. They relied on a report from a costs draftsman, Mr Stuart Waters, which criticised the level of fees, suggesting duplication, excessive internal meetings, and unreasonable time [§58–63]. The Defendants argued that this report constituted a material change of circumstances—an argument the court rejected, holding that these were points always capable of being raised earlier [§59, §75, §181–184].

They maintained they were impecunious and that an unless order would stifle their defence, constituting a denial of justice [§73, §80]. They submitted that the unless order was effectively a variation of the interim payment order under CPR 25.20(6)(b) and should be discharged [§71, §78]. They also argued that the Claimant had security over Belgian properties, an assertion the court found was unsupported by reliable evidence as to value or priority [§74, §204–209].

The Claimant’s Position: The Claimant argued there had been no material change in circumstances to justify varying or revoking the unless order under CPR 3.1(7) [§92–93]. The points in Mr Waters’ report were always available to the Defendants and did not justify revisiting the orders [§84]. The Claimant stressed that the Defendants had never provided cogent evidence of impecuniosity, a point noted when making both the interim payment and unless orders [§94, §101]. The fact the Defendants could now fund leading counsel with a €200,000 loan undermined their impecuniosity claim [§97, §105].

The Claimant submitted that CPR 25.20(6) was the wrong mechanism, as the unless order was a separate sanction for non-compliance, not a variation of the interim payment amount [§82, §116]. On relief from sanctions, the Claimant argued the breach was serious and significant, the reason for default (alleged impecuniosity) was unevidenced, and all circumstances pointed against granting relief [§118–121]. The Claimant also noted the Defendants had forgone the opportunity to trigger a Solicitors Act assessment, which would have stayed the debt claim [§133–135, §162].

The Court’s Decision

Costs Judge Nagalingam dismissed the Defendants’ application in its entirety [§248].

On CPR 3.1(7) and Discharge of the Unless Order: The court applied the principles from Tibbles v SIG plc [2012] EWCA Civ 518 [§113, §193–194]. It found no basis to discharge the unless order. There was no “manifest mistake” in the order’s formulation [§196]. Crucially, there was no material change of circumstances since the order was made [§199–200]. The contents of Mr Waters’ report represented arguments the Defendants could and should have raised at the earlier hearings [§181–182, §184]. The existence of Belgian properties was known at the interim payment hearing, and the court found the purported security was of uncertain value and potentially illusory given competing claims from Belgian tax authorities [§52, §204–209]. The court noted that the only apparent change was the Defendants’ newfound ability to raise €200,000 for legal fees [§201].

On CPR 25.20(6) and Variation of the Interim Payment Order: The court rejected the argument that the unless order was a variation of the interim payment order under CPR 25.20(6)(b) [§213–214]. The two were separate orders; the unless order imposed a conditional sanction for non-compliance with the first, not an adjustment of the payment amount [§214–215]. Even if wrong on this point, the court saw no basis to discharge the order for the same reasons outlined elsewhere [§222].

On Relief from Sanctions under CPR 3.9: Applying the Denton principles [§223], the court held:

- - Stage 1: The breach (non-payment of a substantial interim costs order) was serious and significant [§227].
  - Stage 2: The reason for the breach—alleged impecuniosity—was not made out. The Defendants had consistently failed to provide “detailed, cogent and proper evidence” of their financial position, including full and frank disclosure of their means and prospects of raising funds, as required by authorities such as Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (Comm) [§103–104, §231, §250]. Their evidence relied on inference rather than disclosure [§177, §254].
  - Stage 3: Considering all circumstances, relief was not justified [§233–248]. The Defendants had ample opportunity to challenge the fees via a Solicitors Act assessment but did not [§135, §237]. They ignored the interim payment order without applying to vary or appeal it [§34, §164–165]. Their non-attendance at the unless order hearing was a choice, not a necessity [§142–143, §230]. There was no public interest in allowing parties to ignore court orders based on unevidenced assertions [§236]. The Claimant’s legitimate interest in not litigating further without payment was recognised [§185].

On Impecuniosity and Unjust Enrichment: The court found the Defendants had not established impecuniosity, even to a prima facie standard [§232, §247]. The claim that enforcing the unless order would lead to unjust enrichment was rejected [§262]. The judgment sum represented a contractual debt, and the entry of judgment consequent upon the Defendants’ default was “a consequence of the default”, not unjust enrichment [§263–265]. The loss of the chance to argue reasonableness at an assessment was a direct consequence of the Defendants’ own conduct in breaching court orders [§246, §264–265]. The court also accepted the Claimant’s assurance that any recovery would be netted off against any security held [§260].

Consequently, the unless order and its sanctions remained in effect. The Defendants were ordered to pay the Claimant’s costs of the application, to be summarily assessed on the standard basis [§269].