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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