Introduction
When is your Bill deemed to be paid? Looks like a simple question BUT, the answer is a little more complex. Thankfully, the case of Oakwood Solicitors Ltd -v- Menzies [2024] UKSC 34 confirmed what is meant by “payment” for the purpose of section 70 of the Solicitors Act.
Background
Mr Menzies (M) was represented in a personal injury matter by Oakwood (O) under a CFA. The CFA provided for a success fees of 25% of basic charges and the total fees would be capped at 25% of the damages received following deduction of fees recovered from the opponent.
The CFA signed by the Claimant had a provision that, out of the compensation received, O could “take the balance of the basic charges; success fee; insurance premium; our remaining disbursements; and VAT. You take the rest”
The claim settled and on 11 July 2019 O provided a final statute bill to the Claimant. The covering letter to the bill stated that the total charges had been deducted from the Claimant’s damages as per the agreement.
M sought to challenge the bill under S70 of the Solicitors Act 1974 however, this was following the expiration of the 12 month period. O thereafter argued that M was time barred as a result of the same with specific reference to the provisions set out in S70(4).
Initially, Costs Judge Rowley held that payment had been made, for the purpose of s70(4) when the final statute bill had been delivered. This was appealed and it was held (by Bourne J and Costs Judge Brown as assessor) that there was no payment as there had been no sufficient settlement of account.
There was then an additional appeal whereby the CA held that the retention of monies (in light of the contents of the CFA) did amount to payment under S70(4) and not settlement of account was necessary.
The Supreme Court
The case was ultimately taken to the Supreme Court when M argued that there has to be a reactive process to provision of the bill in order to satisfy “payment”. In response, O argued that their retainer specifically dealt with the retention of funds to satisfy payment and therefore S70(4) had been satisfied.
The Supreme Court thereafter found in favour of M and ultimately held that, to take payment without delivery of a bill, cannot be considered a “payment” as it flies in the face of the purpose of S70. This is mainly due to the fact that it does not allow a Client to examine the reasonableness of the bill prior to making payment – retaining the funds means payment is made without any real consideration of the bill.
Conclusion and Implications
This is clearly a view important and impactful judgment which will no doubt lead to firms reviewing how they, themselves take payment.
In order to avoid falling foul of S70 (with particular regard to what amounts “payments”) it is imperative that if payment has been made via retention or deduction, you must demonstrate that there has been an express agreement for an amount to be taken/ retained as failure to do so can lead to difficulties later down the line.
For further information on this matter or assistance with any other costs query, please contact Karl Robson here.
The case can be found here.
