Menzies v Oakwood Solicitors Ltd – Welcome Clarity but Unlikely to Open the Floodgates.
The Case
The Supreme Court today unanimously allowed the appeal of a solicitor’s former client, in Menzies v Oakwood Solicitors Ltd [2024] UKSC 34. The entire judgment concerns the interpretation of the word “payment” for the purpose of s.70(4) of the Solicitors Act 1974 (“the Act”).
s.70(4) essentially provides that a Court cannot make an order for a solicitor/client assessment pursuant to the Act, where a statutory bill has been delivered and where its “payment” took place more than 12 months earlier. In other words, if the solicitor’s bill has not been “paid” the Court is not prevented from ordering an assessment.
The judgment specifically addressed whether, and to what extent, “…the client should have been informed of and have provided agreement to the specific amount in respect of which payment is to be made pursuant to the bill.” The Appellant argued such an agreement was necessary for the bill to be deemed “paid” for the purpose of s.70(4); the Respondent argued that, provided the client had agreed to the principle of fees being deducted (a term often contained in a retainer) then no further agreement as to the amount of a bill is necessary.
The Supreme Court overturned the unanimous decision the Court of Appeal below to itself, unanimously, allow Mr Menzies’ appeal finding that “…the authorities show a long established understanding as to what payment by deduction or retention requires in this context both generally and with specific reference to section 70 and its statutory predecessors.” That is to say there must be an agreement to the sum to be taken but such an agreement “…may in an appropriate case be inferred from the parties’ conduct and in particular from the client’s acceptance of the balance claimed in the delivered bill.” [71]
The Court found that in the modern world of communication with clients, ascertaining such an agreement should be easier to secure at the conclusion of a cased [82] but “…it is open to solicitors to agree terms with their client that will assist in establishing acceptance of and agreement to the bill” [83]
As to a concern that a client may ‘go to ground’ and refuse to engage with a solicitor at all as to its bill such that a solicitor cannot obtain an appropriate agreement, the Court said this:
“…if the client does not engage, the assessment is likely to be an abbreviated process which will confirm the quantum of the bill and prevent any subsequent challenge by the client. Either in the order for assessment or in the order at the conclusion of assessment the court would, moreover, be able to certify special circumstances, such as the client’s unreasonable refusal to engage or respond, which would allow it to make such costs award as it sees fit in relation to the costs of assessment (see sections 70(9)(b) and 70(10)).” [86]
Our Observations
It is already being touted as a case that will open the floodgates to solicitor/client detailed assessment proceedings pursuant to the Act that would otherwise have been considered barred by statute. However, such concerns may overlook the Court of Appeal’s comments in Karatysz v SGI Legal LLP [2022] EWCA Civ 1388:
“[The solicitor’s former client]…recovered £177.50 before DJ Bellamy, which was all that was really at issue except massive sums by way of costs. The process whereby small bills of costs are taxed in the High Court is to be discouraged. It is far more economic to use the Legal Ombudsman scheme which is a cheaper and more effective method of querying solicitors’ bills in these circumstances. Moreover, whilst it has not been necessary to decide whether there were “special circumstances” in this case under section 70(10), because the Client has not succeeded on her appeal, there remains a lesson to be learned from this case. Firms such as checkmylegalfees.com and their clients should be in no doubt that the courts will have no hesitation in depriving them of their costs under section 70(10) if they continue to bring trivial claims for the assessment of small bills to the High Court, even if those bills are reduced on the facts of the specific case by more than one fifth under section 70(9). The critical issue is and always will be whether it is proportionate to bring this kind of case to the High Court. In this case, it was not.”
Whilst Menzies might open the door to a Court process that was otherwise closed, a solicitor’s client must still overcome what are very high hurdles in order to succeed in a detailed assessment. First, the assessment is on the ‘indemnity basis’ meaning a solicitor’s fees must be reasonably incurred and reasonable in amount (they do not need to be proportionate) and with the benefit of any doubt as to their reasonableness being in the solicitor’s favour (as opposed to the client). Second, against that backdrop, if the client fails to have a solicitor’s bill reduced by 20% or more on assessment (the ‘one-fifth rule’) then, save for special circumstances, the client becomes responsible for the costs of the assessment process in addition.
These hurdles, together with the Court of Appeal’s view as to the costs of assessment in small bill challenges, irrespective of the outcome of that assessment, have seen a drastic reduction in solicitor/client detailed assessment proceedings since Belsner and Karatysz and indeed those hurdles are not affected by Menzies.
Furthermore, the ‘limitation period’ for bringing a challenge to a solicitor’s bill under the Legal Ombudsman scheme (as opposed to an assessment under the Act and the timing bars contained therein), has recently (on 6 October 2024) been revised in their updated guidance ‘Complaints about legal costs.’ The LeO now says:
“When does the ‘clock start’ for complaints like these, where historic bills are involved?
A consumer has to complain within a year of what they’re complaining about – or within a year of becoming aware of it.
The complaints we’re seeing are about solicitors not providing bills when they’re asked for them. The issue consumers are complaining about is not being provided with a bill. This means, usually, that the consumer’s date of awareness is the date the solicitor tells them they won’t provide the bill.
However, it isn’t always straightforward. Law firms offering to represent consumers in this area have been advertising their services for some time. So a consumer’s date of awareness of the situation could be the date they saw a law firm’s advert or made initial enquiries with them. It may only be some time later that they ask their solicitor for a bill. And all this might happen several years after the consumer stopped dealing with the solicitor under their original “retainer”.
If a solicitor tells us that they think a complaint has been made too late (under Rule 5.4 of our Scheme Rules), we’ll ask the consumer or their representative some questions and decide, based on everything we see and hear, what we think the consumer’s date of awareness was.
If we do decide a complaint has been brought in time – and go on to investigate it – then we’re likely to tell the solicitor to provide the consumer with the bill or a copy of it.”
So, whilst Menzies may have opened the door to potential solicitor’s fee challenges under the Act, the hurdles a client faces thereafter will often slam that door in their face pretty sharpish. The Court of Appeal’s, not so subtle, invitation to clients to use the LeO’s complaint procedure together with the LeO’s relaxing of their own guidance as to the timings of when a complaint can be brought, seem to suggest that Menzies is unlikely to open the floodgates as has been suggested and, instead, challenges to solicitors’ bills are more likely to increase under the LeO’s complaints procedure.
Time will, of course, tell.
