Court of Appeal: Statute bills do not have to include profit costs and disbursements

In March 2017, Costs Judge, Master James gave Solicitors one more reason to have sleepless nights when dealing with the matter of:

Richard John Slade (trading as Richard Slade and Company)

-and-

(1) Jugmohan Boodia

(2) Deoranee Boodia

At the hearing of the claim the Costs Judge directed a hearing to determine the following preliminary issue:Mr and Mrs Boodia (Respondents to the Appeal) had issued a claim form seeking an assessment of all bills delivered by their previous Solicitors (Appellants) Richard Slade & Co. under section 70 of the Solicitors Act 1974.

whether, by virtue of them being final for the period covered by them only insofar as they relate to profit costs, the bills raised by the Defendant to the Claimants as set out in the claim form constitute interim statute bills under Part III of the Solicitors Act 1974, and if they are not such interim statute bills whether they are capable of being treated as a series of on account bills culminating in a statute bill dated as per the last in the series”.

Clearly not every bill rendered by a Solicitor to the client is a “statute bill”. A “statute bill” is one complying with the Solicitors Act 1974. Where a solicitor has delivered such a bill to his client, he can potentially sue on it, but he cannot subsequently charge any more for the work in question and, subject to certain time limits, the client can ask for the bill to be assessed by the Court under section 70 of the Act. Depending on the terms of the retainer, a solicitor may be able to raise statute bills during the course of a retainer as well as when he has completed the task on which he has been instructed, but interim bills may, alternatively, represent requests for payments on account. If that is the case, the time limits on applications for assessment do not bite and the solicitor cannot bring proceedings to recover his fees. On the other hand, it may be open to the solicitor subsequently to increase the amounts claimed and also to terminate the retainer if a bill is not paid.

In this matter the Appellants had acted as Solicitors instructed by the Respondents in connection with a dispute relating to a right of way.

The retainer signed 30 January 2013, included the heading “Payment Terms”:

“Bills are rendered monthly in arrears. Our bills are detailed bills and are final in respect of the period to which they relate, save that disbursements (costs and expenses which we incur on your behalf) are normally billed separately and later than the bill for our fees in respect of the same period. Please do not assume, therefore, from a bill for our fees which does not refer to any disbursements that no disbursements were incurred during the period. The more usual situation is that disbursements will have been incurred and will be billed separately.”

The retainer was terminated by the Respondents in October 2016 at a time when some 61 invoices had been delivered (43 of which were devoted exclusively to profit costs and 18 only to disbursements).

The total billed was £207,609.46 (£141,287.70 profit costs plus VAT and £31,703.80 in respect of Counsel, other disbursements plus VAT).

Save for the final four invoices, in respect of which payment was withheld, all invoices had been paid.

At the hearing before Master James, it was found that the various bills rendered constituted  “a series of on account bills culminating with a final statute bill dated 6 October 2016” and on that basis a detailed assessment of all bills was ordered. Master James rejected the contention that the invoices represented “interim statute bills”, the Master explained:

“you cannot in my view have an interim statute bill and then come back at a later stage and say, ‘Here is something else to go into that bill.’ It is either a final bill for the period that it covers or it is not.”

The decision was unsuccessfully  appealed to Slade J in October 2016 who upheld Master James’ decision.

The Matter was appealed to the Court of Appeal and heard by their Lord Justices, Newley, Coulson and Haddon-Cave on 27 November 2018 – Neutral Citation Number [2018] EWCA Civ 2667.

The full judgment sets out the legal framework in some detail.

On the question of must a statute bill include both profit costs and disbursements (both Master James and Slade J said yes) the Court of Appeal considered the provisions of the 1974 Act and found the same shed no light on the matter stating that whilst section 70(6) recognised that a bill could encompass both profit costs and “costs other than profit costs” there was no provision that a bill must include both.

No assistance was provided by section 87 of the 1974 Act, the interpretation provision defined “costs” as including “fees, charges, disbursements, expenses and remuneration” but gave no indication as to whether profit costs and disbursements had to be billed together.

The Court of Appeal found that nowhere did the 1974 Act state that a statute bill must encompass both profit costs and disbursements and, in the judgment,  Newey LJ found “no justification” for such rule in the case law considered.

Reference was made to Ralph Hume Garry v Gwillim [2002]EWCA Civ 1500, [2003] 1 WLR 510 and the guidance for establishing that a bill was not one “bona fide complying with this Act”.

The appeal was allowed, the fact that the various bills included only profit costs or disbursements, not both, did not prevent them from being interim statute bills.

Given the dates of the interim statute bills submitted and coupled with the fact that all bills save for the last four had been paid, one anticipates this will be the end of the dispute.