Vishal Mehta v Howard Kennedy LLP

Whether an invoice is an interim statute bill depends on the parties’ contract. A statute bill must be final and complete for the work it covers, although it need not be the final bill in the entire matter. Contractual documents are interpreted by asking what a reasonable person with the relevant background knowledge would understand. Non-contractual explanatory notes may nevertheless assist that interpretation.

For the purposes of section 70 of the Solicitors Act 1974, payment by a third party may constitute payment by the client where it is made with the client’s knowledge and consent. Special circumstances are assessed evaluatively by comparing the case with the ordinary case and asking whether the fees or charging circumstances call for further explanation or scrutiny.

The appellant instructed the respondent in litigation involving a worldwide freezing order and an alleged US$1 billion fraud. The respondent delivered 24 invoices between June 2022 and May 2023. The appellant brought proceedings under the Solicitors Act 1974 seeking assessment of the costs.

The Costs Judge held that the invoices were interim statute bills, that the retainer was not a contentious business agreement, and that payments made from third-party sources counted as payment where made with the appellant’s knowledge and consent. He also found no special circumstances justifying assessment. The appeal concerned those three issues, together with whether the invoices had been paid within section 70.

1. Statute bills. Ground 1 failed. The retainer expressly provided that bills would be rendered during the work and that, unless otherwise stated, each bill was a final bill for the work carried out in the stated period and had the status of a statute bill. The invoices themselves were detailed and identified the relevant assessment rights.
2. The reservation permitting a value or importance element to be included in a concluding bill did not prevent the invoices from being final and complete. On the facts, there was no agreed uplift, conditional fee or contingent fee. The reservation was conditional and did not apply to this retainer. The invoices were therefore statute bills, rather than requests for payment on account.
3. The contractual interpretation approach in Investors Compensation Scheme Ltd v West Bromwich Building Society, [1998] WLR 896, was correctly applied. The General Notes did not form part of the contract, but were relevant background material in interpreting it. The Court adopted the explanation of interim statute bills in Bari v Rosen, [2012] 5 Costs LR 851.
4. Payment. Ground 3 failed. Following Oakwood Solicitors Ltd v Menzies, [2024] UKSC 34, payment by deduction or retention requires settlement of account and agreement to the sum treated as payment. Payment by a third party may qualify under section 70 where made at the client’s direction or with the client’s knowledge and consent. The appellant’s proposed distinction between payments from his own resources and payments from other sources was artificial and would undermine the statutory scheme.
5. Special circumstances. Ground 4 failed. The question is an evaluative judgment. The appellant had to show that the Costs Judge was wrong. Regular, itemised invoices, substantial payment of the invoices, and cost estimates provided during the retainer did not amount to circumstances requiring assessment. The fact that interim statute bills had been rendered did not itself establish special circumstances.
6. The contentious business agreement issue under section 59 was stayed pending the Court of Appeal’s decision in Barnes v BDB Pitmans. The parties were invited to agree directions or an order within 14 days after judgment in that case.

• High Court (King’s Bench Division): The appeal against the Costs Judge’s preliminary order was unsuccessful on the statute-bill, payment and special-circumstances issues. The contentious business agreement issue was stayed pending Barnes v BDB Pitmans.
• Senior Courts Costs Office: Costs Judge Whalan determined the preliminary issues against the appellant in [2025] EWHC 1008 (SCCO).