Dean Menzies v Oakwood Solicitors Limited

For the purposes of Solicitors Act 1974, retention of a client’s money by a solicitor may constitute payment of a bill, but only where there has been a settlement of account. A general authority to deduct costs does not itself establish payment of the eventual bill.

The solicitor must state the account and obtain the client’s agreement to the actual sum deducted. Agreement may be inferred after a reasonable period if the client is clearly told that silence will be treated as agreement, while preserving the statutory right to seek assessment. A mere statement of account, or unclear information about complaints and assessment, is insufficient.

The claimant appealed against a Costs Judge’s decision that his application for detailed assessment was barred by section 70(4) of the Solicitors Act 1974. The claimant’s solicitors had retained money from damages, deducted their alleged costs shortfall, and returned the balance. They argued that the retention amounted to payment when the account was settled. The claimant argued that there had been no sufficient agreement to the specific deduction.

The central issue was whether, and when, retention of client money by a solicitor constituted payment of the bill for the purposes of the statutory 12-month long-stop.

1. Appeal allowed. The retention of monies did not amount to payment for the purposes of section 70(4) of the Solicitors Act 1974, so the claimant’s assessment application was not time-barred.
2. Section 70 permits assessment as of right within one month of delivery. Thereafter, assessment is subject to the statutory conditions and, after payment, a 12-month period applies. Subsection (4) imposes a long-stop after 12 months from payment.
3. Retention of client money by a solicitor can constitute payment, but only where there has been a settlement of account. The authorities distinguish a settled account from a mere statement of account. A general agreement that costs may be deducted, including a contractual cap, does not settle the actual bill.
4. The account was stated in the final bill and covering letter. The solicitors nevertheless needed the claimant’s agreement to the actual shortfall of £35,711.20. If he objected, there would be no settlement. Silence could potentially amount to agreement after a reasonable period, provided the solicitor clearly explained that the client could decline the deduction and that silence would be treated as agreement subject to the statutory assessment rights.
5. The letter failed that requirement. It referred to the complaints procedure and assessment without clearly explaining the separate choices available to the claimant. It suggested that challenging the deduction required use of the complaints procedure and did not make clear that agreement to deduction did not remove the right to seek assessment.
6. The earlier transfer to the office account did not itself determine the issue. Any breach of the Solicitors Accounts Rules might have regulatory consequences, but it did not prevent retention from constituting payment if the necessary settlement of account otherwise existed.
7. The question whether payment made before delivery of a bill can become payment for section 70 purposes upon later delivery was left open.

• High Court (King’s Bench Division): allowed the appeal from the decision of Costs Judge Rowley dated 11 April 2022.