Solicitors Bound By Informal Resolution Brokered By Legal Ombudsman

Background

This case involved a dispute over legal costs between Ms Sylvia Olukoya (the Claimant) and Riverbrooke Solicitors Ltd (the Defendant).

• The Defendant acted for the Claimant in an employment tribunal claim against the Claimant’s former employer, the London Borough of Tower Hamlets.
• In July 2018, the Claimant complained to the Defendant about the costs, which exceeded the original estimate.
• In August 2018, the Claimant terminated the Defendant’s retainer.
• In early 2019, the Defendant unsuccessfully tried to recover costs from the other side at a tribunal hearing.
• In 2019, the Claimant complained to the Legal Ombudsman about the Defendant’s costs.
• In February 2020, an “Informal Resolution” was agreed between the parties through the Ombudsman. This limited the Defendant’s total claim for fees to £10,000 plus VAT and disbursements.
• The Defendant sent the Claimant a “Final Invoice” for £13,000 in accordance with this agreement, which the Claimant paid.
• In December 2022, nearly 3 years later, the Defendant sent the Claimant a “Revised Final Invoice” claiming an outstanding balance of £144,951.
• The Claimant applied for assessment of the Revised Final Invoice. Preliminary issues were ordered to be tried on the assessment.

Issues In Dispute

The key legal costs issues for the court were:

1. Whether the Informal Resolution was binding on the Defendant, preventing any further claim.
2. Whether the February 2020 invoice was a final statute bill requiring the Defendant to obtain permission before revising it.
3. Whether the Defendant was estopped from issuing the Revised Final Invoice.

The Defendant’s Position

The Defendant argued the Informal Resolution was not binding and the February 2020 invoice was not final.

Specifically, the Defendant argued:

• The Informal Resolution was not contractually binding because there was no consideration from the Claimant and it was not intended to be a binding settlement.
• The Defendant was only accepting the £10,000 as part payment of the debt for costs, not full settlement.
• The Legal Ombudsman investigator, Ms Bartlam, was mistaken in her communications with the parties about the effect of the Informal Resolution.
• The February 2020 invoice lacked sufficient information to constitute a final statute bill.
• The February 2020 invoice was marked “final” not “full and final” and this distinction meant it was not a conclusive final bill.
• The long delay before issuing the Revised Final Invoice in December 2022 indicated the February 2020 invoice was not truly final.
• The Defendant did not intend the February 2020 invoice to be a binding final bill.

The Defendant argued these points meant neither the Informal Resolution nor the February 2020 invoice prevented the Defendant issuing a Revised Final Invoice to claim further costs.

The Claimant’s Position

The Claimant argued the Informal Resolution was binding, the February 2020 invoice was final, and the Defendant was estopped from revising it.

Specifically, the Claimant argued:

• The Informal Resolution was a legally binding contract. The Claimant provided consideration by ending her complaint and giving up other possible remedies.
• The Resolution expressly stated the February 2020 invoice would be a “full and final bill of costs”.
• The February 2020 invoice was intended and acted on as a final statute bill.
• The bill complied with legal requirements for a statute bill. The Claimant had enough knowledge of the costs for it to be valid.
• Marking the bill as “final” rather than “full and final” made no difference to its effect as a final statute bill.
• The Defendant needed the court’s permission to revise a final statute bill and had not obtained it.
• It would be contrary to public policy to allow the Defendant to walk away from an informal resolution made through the Ombudsman.
• The Defendant was estopped from revising the bill because the Claimant relied on the settlement being final.

The Claimant argued these points meant the Informal Resolution and February 2020 invoice were binding and prevented any further invoice.

Decision

The court found:

• The Informal Resolution was a legally binding contract that limited the Defendant’s costs claim to £13,000.

“The terms of that contract were clear and complete. They were based on the offer from the Claimant communicated to the Defendant in Ms Bartlam’s letter of 12 December 2019, as expressly accepted by the Defendant in Mrs Chikwendu’s letter of 14 February 2020 and relayed to the Claimant by Ms Bartlam. Ms Bartlam’s letters of 18 February 2020 set out the procedure by which the agreement would be implemented, which both parties, by their actions, plainly accepted. Accordingly, under the terms of the contract the Defendant was to render a “full and final bill of costs” for £10,000 plus specified disbursements and VAT, as the Defendant did on about 21 February 2020, and the Claimant was to pay it within two weeks, which the Claimant did.” [44]

• Even without a binding contract, the February 2020 invoice was a final statute bill.

“…it is simply not credible that a solicitor would deliver a bill marked “final” and then wait for almost three years to deliver the real “final” bill. As I have observed, the delivery of the “Revised Final Invoice” was prompted by the Legal Ombudsman’s report to the SRA. If that report had not been made, the “Revised Final Invoice” would in my view never have been delivered. For those reasons, my finding is that whether or not the Informal Resolution represented a contractually binding settlement, it is eminently clear that the bill dated 21 February 2020 was delivered as, and was, a statutory bill. It follows that the Defendant needed, but did not apply for, the permission of the court to deliver a “Revised Final Invoice” to the Claimant almost three years later.” [73/74]

• It would be wrong to grant permission to revise the final bill.

“…even if the Informal Resolution had not been legally binding on both parties, it would be wholly contrary to the public policy underlying the Legal Ombudsman’s scheme rules to allow a solicitor, having accepted an informal resolution brokered by the Legal Ombudsman in accordance with that policy, to walk away from the settlement and to render another bill as if it had never happened.” [78]

• The Defendant was estopped from issuing the Revised Final Invoice. (para 87)

“…the matters I have identified that demonstrate that the Claimant provided good consideration for the Informal Resolution would apply equally to support the conclusion that the Defendant is debarred, through promissory estoppel, from raising or relying upon the “Revised Amended Invoice”

In summary, the court found the Informal Resolution was binding, the February 2020 invoice was a final statute bill, and the Defendant could not revise or add to this without permission, which should not be granted. The Defendant was also estopped from issuing a revised invoice.