Oakwood Solicitors Ltd v Menzies

For the purposes of section 70 of the Solicitors Act 1974, a solicitor’s bill is paid by deduction or retention from client money only if the client agrees to the amount taken or to be taken in satisfaction of that bill. A general advance authority permitting deductions does not suffice when the retainer neither fixes the fee nor provides a formula determining it.

The required agreement follows delivery of a compliant bill and may be express or inferred from conduct, including acceptance of the balance calculated under the bill. Delivery of the bill cannot itself constitute payment. This construction protects the client’s opportunity to examine and challenge the bill before the stricter time limits governing paid bills apply.

The appellant instructed the respondent solicitors under a conditional fee agreement to pursue a personal injury claim. The agreement authorised payment of charges from recovered compensation and capped the total deduction, but did not determine the amount of the fees. After settlement, the solicitors retained money, transferred part to their office account and delivered a final bill stating that the total charge had been deducted.

The client later applied for assessment under section 70 of the Solicitors Act 1974. A Costs Judge held that the application was barred because the bill had been paid more than 12 months earlier. Bourne J allowed the client’s appeal: [2022] EWHC 3199 (KB); [2022] Costs LR 1793. The Court of Appeal reversed that decision: [2023] EWCA Civ 844; [2023] 1 WLR 4495.

The central issue was whether payment by deduction from client money requires agreement to the particular amount charged, or whether advance authority to deduct fees, combined with delivery of a compliant bill, is sufficient.

1. Appeal allowed unanimously. Lord Hamblen, with whom Lord Briggs, Lord Sales, Lord Leggatt and Lord Richards agreed, held that the bill had not been paid for the purposes of section 70(4) of the Solicitors Act 1974. Bourne J’s order for assessment was restored.

2. Payment by deduction or retention from money held for a client requires the client’s agreement to the amount taken or to be taken in satisfaction of the delivered bill. A prior agreement that fees may generally be deducted is insufficient where it neither fixes the fee nor supplies a formula determining its amount. The cap in the conditional fee agreement limited the possible charge but did not quantify it.

3. This meaning follows from the ordinary meaning, statutory context and protective purpose of section 70. Payment ordinarily signifies acceptance of the amount charged. Section 70 concerns the reasonableness of the specific costs claimed and gives the client an opportunity after delivery to inspect the bill, obtain advice and seek assessment. Its structure envisages payment after delivery. Treating delivery itself as payment would prematurely place many clients within the stricter regime for paid bills.

4. The authorities concerning section 70 and its statutory predecessors establish a longstanding requirement for a settlement of account. That expression denotes agreement to the amount retained or deducted, rather than agreement merely to the mechanism of deduction. Agreement need not be express. It may be inferred from conduct, particularly the client’s acceptance of the balance calculated under a delivered bill.

5. The solicitors’ practical objections did not alter the statutory meaning. Fees may be fixed prospectively or quantified by an agreed mathematical formula. Solicitors may also adopt terms and communications which facilitate later acceptance. If a client refuses to engage, the solicitor may seek assessment and the court retains powers concerning the costs of that process.

1. United Kingdom Supreme Court: The client’s appeal was allowed unanimously. The court restored Bourne J’s order for assessment: [2024] UKSC 34.
2. Court of Appeal: The solicitors’ appeal was allowed. Advance authority to deduct fees, together with delivery of a compliant bill, was held sufficient to constitute payment: [2023] EWCA Civ 844; [2023] 1 WLR 4495.
3. High Court: Bourne J, sitting with Costs Judge Brown as assessor, allowed the client’s appeal because there had been no sufficient settlement of account: [2022] EWHC 3199 (KB); [2022] Costs LR 1793.
4. Senior Courts Costs Office: Costs Judge Rowley held that payment had occurred more than 12 months before the assessment application and that section 70(4) barred the claim. He would otherwise have found special circumstances and ordered assessment.