Statute Bills And Payments On Account In Solicitors Act Assessments

Pickering v Thomas Mansfield Solicitors Limited involved a dispute between Lisa Pickering (the Claimant) and her former solicitors, Thomas Mansfield Solicitors Limited (the Defendants).

The Claimant had instructed the Defendants to act on her behalf in several legal matters, including:

1. The “Property proceedings”
2. The “Portbond proceedings”
3. An unfair prejudice claim called the “Caprina proceedings”
4. A dispute with her previous solicitors

On or about 5 April 2023, the Defendants delivered four invoices (numbered 33663, 33664, 33661 and 33662) to the Claimant, accompanied by timesheets or ledgers. The Defendants claimed the invoices totaled £2,533,579.14, of which £1,175,849.50 had been paid on account.

Chronology of relevant events

• February 2021: The Claimant approached the Defendant solicitors to act in place of other solicitors in the various legal disputes.
• 1 March 2021: The Defendants’ retainer letter indicated that Paul Thomas’ hourly rate would be £375 per hour.
• Early/mid-2021: The Property proceedings, in which the Defendants were instructed after issue of the claim and shortly before trial, were listed for trial.
• August/September 2021: Paul Thomas’ hourly rate was increased to £575 per hour.
• November 2021: The Claimant provided an undertaking that the Defendants’ costs would be paid out of the proceeds of sale of a property called Edlington.
• 2022: The Portbond proceedings, in which the Defendants were instructed after preparation of the Statement of Case, were listed for trial.
• 9 June 2022: The Claimant gave a second undertaking for £750,000 out of the proceeds of sale of Edlington as security for the Defendants’ costs in taking the Portbond proceedings to trial.
• 5 April 2023: The Defendants delivered the four invoices to the Claimant.
• February 2023: The Defendants requested assurances from Lupton Fawcett, other solicitors acting for the Claimant, that no payment would be made in relation to the Claimant’s entitlement from the sale of Edlington without the Defendants’ consent. The requested assurances were not provided.
• 5 June 2023: Arch Law, newly instructed by the Claimant, sought the Defendants’ agreement that the invoices were not statutory bills.
• 12 June 2023: The Defendants agreed to an assessment being ordered, but only on condition that the Claimant makes a further payment on account of £975,000 by 11 July 2023.
• 22 June 2023: The Claimant issued her Part 8 claim in the Sheffield County Court seeking assessment of the invoices, or alternatively an order for delivery of fresh statutory bills.
• 19 February 2024: The Claimant’s solicitors made allegations of negligence against the Defendants.

Issues to be decided

The key issues to be determined by the court were:

1. Whether the four invoices delivered by the Defendants were “statute bills” capable of assessment under the Solicitors Act 1974.
2. If the invoices were found to be statute bills:

(a) Whether the court should order the Claimant to make a further interim payment as a condition of ordering an assessment of the bills, and if so, in what amount. The Defendants sought a further £980,000 approximately.

(b) Whether, independently of the assessment, the court should order the Claimant to make a further interim payment against the sums claimed in the invoices.

The parties’ positions

On the issue of whether the invoices are statute bills:

The Claimant argued that the invoices could not be statute bills because they did not provide adequate information about the sums paid on account and ccould not be reconciled with various payments made under earlier invoices. The Claimant relied on passages from the Court of Appeal’s judgment in Karagyz v SGI Legal LLP [2022] EWCA Civ 1388 regarding the required content of solicitors’ bills.

The Defendants contended that:

• Under section 69(2E) of the Solicitors Act 1974, a delivered bill is presumed to be a statute bill unless the client proves otherwise.
• The guidance in Karagyz on bill content was obiter, represented best practice rather than legal requirements, and did not overrule the binding precedents set out in cases such as Ralph Hume Garry v Gwillim [2002] EWCA Civ 1500 on what constitutes a statute bill.
• The invoices, together with the accompanying timesheets/ledgers, provided sufficient information to enable the Claimant to decide whether to seek assessment. Any lack of detail could be addressed by the Claimant’s knowledge from other documents and information provided during the retainer.

On the issue of ordering a further interim payment:

The Defendants argued that:

• The Claimant should be required to make a substantial further payment on account as a condition of assessment, given the large sums claimed, the Defendants’ view that much of the Claimant’s challenge was unmeritorious, and the risk that the Claimant would seek to avoid payment.
• The Claimant’s wealthy family members could raise the funds for a further payment.
• The Claimant’s conduct, such as seeking to set off costs orders between different proceedings and allegedly going back on previous costs undertakings, demonstrated bad faith and a desire to avoid payment.

The Claimant submitted that:

• Ordering a further substantial interim payment would be inappropriate at this early stage, before detailed assessment of the bills.
• A preliminary view of the Defendants’ time records suggested the bills may be significantly reduced on assessment, due to high hourly rates, large time entries for a senior fee earner, and other issues.
• The trial judge in the Portbond proceedings was critical of how the Defendants presented the Claimant’s case, which may impact the recoverability of certain costs.
• The property Edlington, over which the Claimant had given undertakings in the Defendants’ favor, remained adequate security for the Defendants’ costs for the time being.

Judge’s findings

Costs Judge Brown made the following key findings and determinations in the judgment:

1. On whether the invoices delivered by the Defendants are statute bills:

The judge found that the invoices, together with the accompanying time sheets or ledgers, were statute bills capable of assessment under the Solicitors Act 1974.

“In short, the invoices together with their enclosures made it sufficiently clear what had been paid and provided sufficient information to the Claimant to enable her to take a decision as to whether to apply for assessment. But I am, further, satisfied that in any event the Claimant had sufficient knowledge of the interim payments.”

The judge rejected the Claimant’s argument, based on Karagyz, that the invoices cannot be statute bills due to inadequate information about payments on account. He found that the relevant passages in Karagyz were obiter, represented best practice rather than legal requirements, and did not overrule the law on statute bills set out in cases such as Ralph Hume Garry v Gwillim [2002] EWCA Civ 1500.

“It is clear however that the Court of Appeal in Karagyz was at least primarily concerned with the construction of the phrase ‘the amount of the Bill’ for the purposes of s70(9) of 1974 Act – the ‘1/5th rule’. What was said about the requirements of bill was on any view plainly obiter, as Mr. Ralph accepts…In short, the invoices together with their enclosures made it sufficiently clear what had been paid and provided sufficient information to the Claimant to enable her to take a decision as to whether to apply for assessment.”

2. On whether to make the assessment conditional upon a further interim payment by the Claimant:

The judge decided not to order the Claimant to make a further interim payment as a condition of the assessment going ahead.

“…a sum has already been paid by way of interim payment which one might expect to be deployed to pay disbursements. I acknowledge that the sum so far paid is less than 50% of the sums claimed, and Mr. Marven says that a reduction of 50% might be said to be at least outside the norm on an assessment on the indemnity basis. However I have not been satisfied with the requisite degree of confidence that a further sum will be due and that a further payment should be made now. Further, I am not persuaded that the security identified in the course of the retainer by the parties will not continue to be available at least for some significant period. Accordingly for these various reasons, I am not persuaded at this stage to make an order for a further payment.”

In reaching this conclusion, the judge took into account:

(a) A preliminary view that the Defendants’ time records suggested scope for significant reductions to the bills on assessment, due to factors such as high hourly rates, time entries for a senior fee earner, and other issues.

“…a preliminary consideration of the information available suggests there might even be room for challenge in respect of hourly rates. In this case the retainer letter of 1 March 2021 appears to indicate that the hourly rate of the senior fee earner, Paul Thomas, would be £375 per hour. But shortly afterwards, in or about August and September 2021 this rate was increased to £575 per hour… even if the Claimant can be taken to have approved the increased rate, there might be issues as to the reasonableness of the rate not least… if there were any basis for a challenge to the rate of this particular fee earner, this could also have a significant effect on the amount payable.

(b) Possible issues regarding the recoverability of certain costs, given the trial judge’s reported criticisms of how the Defendants presented the Claimant’s case in the Portbond proceedings.

“A particular issue the Claimant raises is as to the costs of expert evidence in the Portbond proceedings. It is suggested that the trial judge did not permit her to rely upon a forensic accountancy report obtained by the Defendant because, I am told, the evidence went beyond the terms of an order (presumably a case management order). It is said that the costs of the relevant accountancy evidence was £80,000 in the letter of 19 February 2024 (albeit higher figures are mentioned elsewhere). This matter may well require particular consideration. Indeed there may be a need to consider not only the disbursements themselves but the associated fees of counsel and solicitors.

“At this stage it is obviously not appropriate for me to form any view about any of these matters…However in an assessment a court is obviously required to consider the reasonableness of the time spent and the charges which the solicitors require the Claimant to pay. It strikes me that if the trial judge did make the comments attributed to him, it might indicate that some scrutiny is required of the relevant costs…”

(c) The continuing availability of the property Edlington as security for the Defendants’ costs, pursuant to undertakings given by the Claimant.

“Edlington remains unsold and there is, as I understand it, no imminent prospect that it will be sold (the Defendants’ case appears to be that the Defendant was dragging her heals over the sale). The security, such as it is (Claimant’s interest in the property which appear to be of substantial value 50%), remains and will remain at least for a good while. Mr. Marven did not argue that the undertakings were worthless… His point was not that the undertakings were not a form of security but that they did not mean the Claimant was not required to pay the Defendants until after the sale of the property sums which were due. However property was considered adequate security when the solicitors committed themselves to doing the work, and it is not clear why it should be inadequate when there is a challenge to invoices.

“In these circumstances I am not satisfied that Edlington does not, as things stand, remain sufficient security for costs…It is to be emphasized that the Defendant’s case, as I understand it, has been focused on the requirement of a further interim payment.”

3. On whether to independently order a further interim payment:

The judge also declined to make an independent order for a further interim payment against the sums claimed in the invoices, for essentially the same reasons as above.