Interim Statute Bills Upheld | Court Rejects CBA Challenge And Confirms Valid Payments Under Solicitors Act 1974.

MEHTA V HOWARD KENNEDY LLP [2025] EWHC 1008 (SCCO)

Mehta v Howard Kennedy LLP [2025] EWHC 1008 (SCCO) concerned a solicitor-client dispute regarding the status of 24 invoices totalling £3,124,674.04 delivered by Howard Kennedy LLP to Mr Mehta in relation to high-value international litigation involving a worldwide freezing order. Costs Judge Whalan examined three primary issues: (i) whether the invoices constituted interim statute bills, (ii) whether the retainer was a Contentious Business Agreement (CBA), and (iii) whether the invoices had been ‘paid’ within the meaning of section 70 of the Solicitors Act 1974. The court determined that the invoices were valid interim statute bills, the retainer did not qualify as a CBA, and most invoices were validly paid by third-party entities with the client’s consent. Critically, the court found no ‘special circumstances’ justifying assessment of invoices delivered more than 12 months before the application, with the sole exception of one invoice dated 25th May 2023. The judgment comprehensively rejected the client’s attempts to challenge the solicitor’s billing given the detailed nature of the invoices and the client’s ongoing awareness of his accumulating liability throughout the proceedings.

I am satisfied, on the proper contractual interpretation of the retainer, 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. I prefer, in other words, the submissions of Mr Stacey for the Defendant to those of Mr Dunne for the Claimant. Paragraph 5 of the Terms of Business refers clearly to the fact that "each bill issued to you is a final bill covering the total charge for the work carried out within the stated period". Moreover, "each bill has the status of a statute bill", unless otherwise stated. Specific reference is made to the solicitor's right to sue on the invoice and the client's concomitant rights to have the bill assessed under the Solicitors Act 1974.

Citations

Ralph Hume Garry v Gwillim [2003] 1 WLR 510 A solicitor claiming that invoices are interim statute bills bears the burden of proving that the retainer permits such billing, which must demonstrate finality and certainty in the charges rendered. Vlamaki v Sookias & Sookias [2015] 6 Costs LR 827 Where ambiguity exists in a solicitor’s retainer as to whether a bill is an interim statute bill, it must be resolved against the solicitor to protect the client’s right to assessment. Boodia v Richard Slade & Co. Solicitors [2019] 1 WLR 1126 A retainer that does not clearly permit interim statute billing cannot be retrospectively construed to restrict a client’s right to assessment. Ivanishvili v Signature Litigation LLP [2024] 1 WLR 4636 A retainer containing provisions inconsistent with finality, such as reserved rights to add charges for “value” or “importance,” will prevent invoices from qualifying as interim statute bills unless these terms are shown to be inapplicable. Finnan v Candey Ltd [2024] EWHC 2157 (Ch) A written retainer providing for remuneration by hourly rates for specific litigation constitutes a Contentious Business Agreement under the Solicitors Act 1974 unless excluded by its terms or the parties’ intentions. Acupay System LLC v Stephenson Harwood LLP [2021] EWHC B11 (Costs) An agreement does not become a Contentious Business Agreement merely because it satisfies the broad terms of s.59 SA 1974; the court must determine whether the parties intended to engage that regime or the separate s.70 statutory framework. Oakwood Solicitors Ltd v Menzies [2024] UKSC 34 For an invoice to be considered “paid” under s.70 of the Solicitors Act 1974, there must be evidence of a client’s knowledge and consent to the payment, with the inference that the client accepted the sum as settlement of the bill. Falmouth House Freehold Co Ltd v Morgan Walker LLP [2010] EWHC 3092 (Ch) The existence of “special circumstances” justifying assessment outside the statutory time limit is a value judgment based on whether the case materially differs from the norm. Masters v Charles Fussell & Co LLP [2021] EWHC B1 (Costs) Special circumstances under s.70(3) of the SA 1974 may be established by factors that are out of the ordinary course, even if not exceptional, provided they justify a departure from usual time limits. Raydens Ltd v Cole [2021] 7 WLUK 539 A strong indicator of special circumstances is the presence of unexplained fees or circumstances surrounding the charges that require further scrutiny under court assessment. Harrods Ltd v Harrods (Buenos Aires) Ltd [2014] 6 Costs LR 975 The delivery of serial interim statute bills during ongoing and complex proceedings may, in certain cases, satisfy the threshold for special circumstances, particularly where prejudice to the client’s assessment rights arises.

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Key Points

For a solicitor’s invoice to constitute an interim statute bill, it must be contractually final for the work billed in the relevant period and expressly stated to be a statute bill, with any ambiguity resolved against the solicitor. [7, 14]
A solicitor’s right to render interim statute bills depends on clear and unambiguous contractual terms; where the agreement contains provisions permitting later additions or adjustments, this may invalidate the finality necessary for statute bill status. [7, 12, 14]
The Solicitors Act 1974 provides for two mutually exclusive costs assessment regimes—under sections 59–63 (Contentious Business Agreements) and sections 69–71 (bill assessments)—and the applicable regime is determined by construing the terms of the retainer. [20, 22, 24]
Payment of a solicitor’s bill for the purposes of section 70(4) of the Solicitors Act 1974 requires evidence of knowledge and consent by the client and may include payments made by third parties acting with the client’s authority. [29, 32]
An application for assessment of a solicitor’s invoice delivered more than twelve months earlier requires the client to show “special circumstances,” which means something unusual in the billing or circumstances of the case that calls for further explanation, but does not require exceptional circumstances. [35–36, 41]

"I am satisfied that the receipts identified by Mr Bignell at paragraphs 33-37 of his statement (HB 384-6) were payments within the meaning of s.70(4) of the 1974 Act. All payments were made in accordance with the court's provision and scrutiny in the WFO. There is 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 evidence adduced (at some length) by Mr Bignell establishes these payments were indeed made with Mr Mehta's knowledge and consent."

Key Findings In The Case

The invoices rendered by Howard Kennedy LLP to Mr Mehta between June 2022 and May 2023 were interim statute bills, as they were contractually final for the work billed in the relevant period and expressly stated to have statute bill status, with no fundamental ambiguity undermining this [14–15].
The parties’ retainer elected to adopt the Solicitors Act 1974 ss.69–71 regime, and not a Contentious Business Agreement under ss.59–63, given the clear contractual references to statute bills, assessment rights under s.70, and the absence of any express invocation of CBA protections [22–24].
Payments made towards the invoices, including those made by companies owned or controlled by Mr Mehta and by third parties such as Hogan Lovells, were held to satisfy the requirements for “payment” under section 70(4) of the Solicitors Act 1974 because they were made with Mr Mehta’s knowledge and consent [31–32].
Mr Mehta failed to establish “special circumstances” justifying the assessment of unpaid invoices delivered more than 12 months before the application, as he had been provided with regular, detailed, itemised bills and was aware of his accumulating liability without any matters arising that called for further scrutiny [41].
Mr Mehta was entitled to an assessment only in relation to invoice 460369 dated 25 May 2023, as it fell within 12 months prior to the date of issue of the claim, and thus an assessment is automatic under section 70(1) of the Solicitors Act 1974 [5(vi), 43(vi)].

"I am not satisfied that the Claimant has demonstrated any matters which 'call for an explanation' or the scrutiny of the court. Pursuant to the retainer, the Defendant delivered regular, itemised invoices that exhibited very detailed breakdowns of the profit costs and disbursements that the Claimant had incurred during each relevant period. He was aware, in other words, of his ongoing, accumulating liability, and paid almost 80% of the invoices rendered. There is nothing, on the particular facts of this case that leads me to find that special circumstances exist."

Background

The case at hand involves Mr Vishal Mehta, the Claimant, who retained Howard Kennedy LLP, the Defendant, in June 2022 to assist with litigation concerning an alleged US$1 billion fraud against the Mehta family. The Defendant was instructed in response to a worldwide freezing order (WFO) against the Claimant and his family. The litigation covered various stages, including applications to list and appeal the WFO and orders for the Claimant to surrender his passport and provide asset details. The Defendant provided their services from 22nd June 2022 until the retainer was terminated on 5th May 2023.

During this period, the Defendant issued 24 invoices to the Claimant, totalling £3,124,674.04, including VAT and disbursements. The Defendant contended that 13 invoices had been paid more than 12 months before the commencement of the action, thus exempting them from assessment under the Solicitors Act 1974 (‘SA 1974’). This claim of ‘payment’ was disputed by the Claimant. The Defendant asserted that the remaining invoices were unpaid, except for one on 25th May 2023. As these invoices were delivered over 12 months before the application issue, any assessment under SA 1974 required demonstration of ‘special circumstances’. The unpaid invoices totalled £697,583.05, including VAT and disbursements.

Costs Issues Before the Court

The court was tasked with addressing several crucial costs-related issues:
(i) Whether the invoices delivered by the Defendant were interim statute bills or a series of interim invoices making up a ‘Chamberlain’ bill, which became ‘final’ upon the last invoice dated 25th May 2023.
(ii) Whether the retainer constituted a Contentious Business Agreement (‘CBA’) within the meaning of ss59 to 63 of the SA 1974, and if so, whether it was a ‘fair and reasonable agreement’.
(iii) Whether certain invoices were ‘paid’ within the meaning of SA 1974 and if the Claimant could demonstrate ‘special circumstances’ under s70(3) of the SA 1974 to justify an assessment.

The Parties’ Positions

The Claimant contended that the invoices were part of an entire ‘Chamberlain’ bill finalised with the last invoice dated 25th May 2023. The Claimant referenced Ralph Hume Garry v. Gwillim, Vlamaki v. Sookias & Sookias, and Boodia v. Richard Slade & Co. Solicitors, to support the contention that the burden of proving interim statute bills lies with the receiving party. Further, the contractual provisions and any ambiguities should be resolved against the solicitor.

Conversely, the Defendant argued that the invoices were indeed interim statute bills as per the clear wording in the Retainer Letter and Terms of Business. The details in the bills aligned with the statutory requirements, and the reservation concerning ‘value’ and ‘importance’ elements was irrelevant as it was not applicable in this case.

Regarding whether the retainer was a CBA, the Claimant argued that the retainer met the definition under s.59 of the SA 1974 due to its specific terms related to contentious business and hourly rates, thus invoking the statutory protections available under ss59-63. The Defendant contended that the agreement was not a CBA, asserting that the intention was for the retainer to fall under the separate statutory regime under ss.69-71. This was substantiated by the terms within the retainer that encapsulated the assessment rights under these provisions.

Concerning payment, the Claimant argued that none of the bills were ‘paid’ within the meaning of the SA 1974. The Defendant, however, provided detailed evidence showing payments made from various sources, including companies related to the Claimant and other solicitors, all authorised under the WFO.

The Court’s Decision

The court determined that the invoices delivered were interim statute bills, given the clear terms outlined in the Retainer Letter and the Terms of Business, which specified that each bill was a final bill for the work carried out within the stated period. These invoices included detailed breakdowns and met the statutory definition of interim statute bills.

On the issue of whether the retainer constituted a CBA, the court concluded that the 1974 Act allows for two separate and mutually exclusive regimes. The nature of the retainer, including the specific terms referencing the delivery of statute bills and rights under ss.69-71, indicated that the agreement did not invoke the protections under ss.59-63. Consequently, the court was not required to determine whether the agreement was ‘fair and reasonable’.

Regarding payments, the court found that the receipts identified by the Defendant were legitimate payments within the meaning of s.70(4) of the 1974 Act. These payments were authorised under the WFO and made with the knowledge and consent of the Claimant. Therefore, the court ruled that it could not order an assessment of any paid invoices delivered before 23rd May 2023, nor could it order an assessment of unpaid invoices, as no ‘special circumstances’ were demonstrated.

In summary, the Claimant was found not entitled to:

(i) Assessment of the invoices paid before 23rd May 2024.
(ii) Assessment of the unpaid invoices, as no special circumstances existed.

However, the Claimant was entitled to an assessment of the invoice delivered on 25th May 2023, as specified in a previous order dated 30 July 2024.

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