Marta Karatysz v SGI Legal LLP

For the purpose of allocating assessment costs under section 70(9) of the Solicitors Act 1974, the amount of a solicitor’s bill is the total sum demanded for the categories of costs being assessed. The calculation includes sums already paid and sums paid by a third party.

A bill’s completeness and its explanation of the charges may affect its validity or adequacy. Those matters do not alter the statutory inquiry under section 70(9), which asks whether the client obtained a reduction exceeding one fifth of the sum charged. Solicitors should state clearly the charges, disbursements, payments, outstanding balance and amount demanded.

Following settlement of a low-value road traffic personal injury claim, the Solicitors delivered a bill listing costs, a success fee and disbursements totalling £2,731.90. It also recorded £1,116 received from the defendant’s insurer and a paid balance of £455.50 deducted from the Client’s damages.

District Judge Bellamy treated the amount of the bill as £2,731.90. On the first appeal, Lavender J held that it was £1,571.50. The Client appealed with permission.

The central issue was the meaning of “the amount of the bill” in section 70(9) of the Solicitors Act 1974. That amount determined whether a reduction of one fifth had been achieved and, consequently, which party ordinarily bore the costs of assessment.

1. The appeal was dismissed with costs. The amount of the statutory bill for the purposes of section 70(9) of the Solicitors Act 1974 was £1,571.50, comprising £1,116 paid by the insurer and £455.50 paid by deduction from the Client’s damages. Lavender J had therefore reached the correct result.

2. The proper inquiry, for each category of costs being assessed, is the total sum which the bill demands be paid to the solicitors. It is immaterial that all or part of that sum has already been paid. It is also immaterial that payment came from a third party, provided the bill makes the position clear. The amount cannot vary according to the identity of the payer.

3. Section 70(9) supplies a rule of thumb for allocating the costs of assessment. It asks whether the client secured a reduction of more than one fifth in the amount charged. Requirements that a bill be complete and contain enough narrative to permit an informed decision about assessment do not determine its amount for this purpose.

4. The earlier authorities turned on the proper interpretation of their respective bills. A larger stated figure does not determine the amount where the bill expressly limits the sum charged. Conversely, an offer to accept less upon a condition leaves the amount of the bill at the larger sum demanded. The older authorities were also of limited assistance because they concerned differently worded legislation.

5. The Solicitors’ initial acceptance that the bill amounted to £2,731.90 did not bind them. The amount was a mixed question of fact and law. Had withdrawal of an admission been required under the Civil Procedure Rules 1998, it would inevitably have been permitted in this test case.

6. As practical guidance, bills should identify base costs, any success fee and disbursements. They should also identify payments, their source and method, the outstanding balance and the sum demanded. Any conditional offer to accept less should be transparent.

7. The court did not decide the legal requirements governing gross-sum bills or the content of bills for non-contentious business. It nevertheless warned that disproportionate High Court proceedings over small bills may justify depriving a successful client of assessment costs under section 70(10). The cheaper Legal Ombudsman procedure should ordinarily be considered.

1. Court of Appeal (Civil Division): By [2022] EWCA Civ 1388, unanimously dismissed the Client’s second appeal and upheld the determination that the bill amounted to £1,571.50 for the purposes of section 70(9) of the Solicitors Act 1974.

2. High Court, Queen’s Bench Division: Lavender J held on 11 June 2021 that the amount of the bill was £1,571.50 rather than £2,731.90.

3. County Court: District Judge Bellamy determined that the amount of the bill was £2,731.90, initially on paper and again following an oral hearing on 7 January 2020.