Life is rarely straightforward and the solicitors’ bills rules are no exception. In this practical guide we explain what the rules are and why they are important when it comes to the recoverability of the fees and disbursements claimed in solicitors’ bills.
Types of solicitors’ bills
It is important to understand that there are different categories of solicitors’ bills and that not all bills are equal in the eyes of the law. Unfortunately, and because the same terminology can be used when labelling and referring to different bills, confusion and misunderstanding can arise when dealing with them, not only on the part of clients but solicitors too.
Bills within this category are governed by the Solicitors Act 1974 and are properly referred to as statute bills or statute invoices.
To come within this category, the solicitors’ bill must comply with the rules set out within section 69 of the 1974 Act. Amongst other matters, these provide that:
(1) Subject to the provisions of this Act, no action shall be brought to recover any costs due to a solicitor before the expiration of one month from the date on which a bill of those costs is delivered in accordance with the requirements mentioned in subsection (2)…;
(2) The requirements referred to in subsection (1) are that the bill must be —
(a) signed in accordance with subsection (2A), and
(b) delivered in accordance with subsection (2C).
(2A) A bill is signed in accordance with this subsection if it is —
(a) signed by the solicitor or on his behalf by an employee of the solicitor authorised by him to sign, or
(b) enclosed in, or accompanied by, a letter which is signed as mentioned in paragraph (a) and refers to the bill.
(2C) A bill is delivered in accordance with this subsection if —
(a) it is delivered to the party to be charged with the bill personally,
(b) it is delivered to that party by being sent to him by post to, or left for him at, his place of business, dwelling-house or last known place of abode, or
(c) it is delivered to that party —
(i) by means of an electronic communications network, or
(ii) by other means but in a form that nevertheless requires the use of apparatus by the recipient to render it intelligible, and that party has indicated to the person making the delivery his willingness to accept delivery of a bill sent in the form and manner used.
(2E) Where a bill is proved to have been delivered in compliance with the requirements of subsections (2A) and (2C), it is not necessary in the first instance for the solicitor to prove the contents of the bill and it is to be presumed, until the contrary is shown, to be a bill bona fide complying with this Act.
Bills within this category can be final statute bills or interim statute bills. Moreover, and as substance prevails over form, an interim statute bill may also be treated either as a final statute bill for the period which it covers or in respect of the engagement itself.
However, while a solicitors’ bill cannot be a statute bill unless it complies with section 69 of the Solicitors Act 1974, the fact that it does comply is not the sole determinant of whether it constitutes a statute bill or not.
Statements of costs on account
Solicitors’ bills that do not comply with the requirements of section 69 of the Solicitors Act 1974 constitute statements on account of costs or demands for payments on account of costs. This will be so regardless of their form and notwithstanding that they might be labelled as interim invoices.
Gross sum bills
In the case of contentious business (being generally business done in or for the purpose of proceedings begun before a court or before an arbitrator) and pursuant to section 64(1) of the Solicitors Act 1974, solicitors have the option of submitting a gross sum bill. This is an invoice which states only the amount of the total charge and does not provide a detailed breakdown of the work which it covers.
These are a series of solicitors’ bills which are initially treated as requests for payments on account, but which collectively become a single statute bill upon delivery of a final bill.
The importance of the retainer
Solicitors will not always be entitled to submit interim statute invoices to their client. Whether they can or not will depend in large part on the terms upon which the solicitors are engaged.
Where a retainer is an entire contract, the solicitors are normally required to complete the work for which they are engaged before submitting any bill.
However, in other circumstances the courts have been willing to imply that the retainer allows for the delivery of interim statute bills where there have been natural breaks in the proceedings. The result has been that interim bills raised in such circumstances have been found to be stand-alone bills, rather than merely contributions toward a final bill.
Where the terms of the solicitors’ retainer expressly record that the solicitors may submit interim statute bills during the course of their engagement, then there is usually no difficulty in the solicitors doing so.
The implications for recovery of fees
Whether the solicitors’ invoices are statute bills or merely requests for payments on account is important in the following material respects:
- If the bill does not comply with the statutory requirements, the solicitors have no right to commence proceedings against the client to recover the amounts subject to it;
- If the bill is in fact a request for payment on account the client has no right to demand an assessment of the costs subject to it;
- If the bill is a statute bill, the amount claimed for legal costs cannot usually be adjusted at a later stage and/or depending on the outcome of the work undertaken (other than by consent of the client or order of the court), whereas it can be freely adjusted if the bill is merely a request for a payment on account;
- A client is under a legal obligation to pay the solicitors’ statute bills and the solicitors are entitled to commence proceedings against the client in the event of default;
- The time limits contained within section 70 of the Solicitors Act 1974, which govern the client’s right to request an assessment of the solicitors’ bills, only apply once a statute bill has been delivered and do not apply to a demand for a payment of costs on account.
Related court decisions
To put the solicitors’ bills rules into greater context, we have set out below a summarised account of a series of important cases in which the courts have had to consider and apply these rules.
Davidsons (a Firm) v Jones-Fenleigh (1980)
In this case the court had to determine whether or not four consecutive solicitors’ bills delivered to the client were individual statute bills and, therefore, subject to the time limits for assessment prescribed by the Solicitors Act 1974.
The client had instructed the solicitors to represent him in complex and drawn out matrimonial proceedings with this wife. During the course of the proceedings the solicitors raised four invoices. The first three of these were paid without demur, while all but £2,820.51 was paid towards the final invoice.
The solicitors commenced proceedings against the client to recover the outstanding balance. In response, the client sought and obtained an order that all four of the invoices be assessed by the court. This was on the basis that the solicitors were retained to conduct the entirety of the proceedings and that, this being a single contract for the performance of that retainer in its entirety, they were not entitled to any remuneration until the conclusion of those proceedings. Accordingly, the four bills were to be treated as one bill and that all of them should be assessed. The solicitors appealed, first to the Judge in Chambers and then to the Court of Appeal.
Giving the leading judgment, Lord Justice Roskill observed that:
- It had been conceded that the fourth bill, which was by far the largest, fell within the prescribed time limits and was liable to be assessed under section 70 of the Solicitors Act 1974;
- There was clear authority that in the old-fashioned common-law action a solicitor was not entitled to be paid until after he had completed his duties in that action;
- The Court of Appeal had accepted in In Re Romer & Haslam (1893) that in certain circumstances a solicitor might, in the course of a long-drawn-out common-law action or arbitration, properly send in bills from time to time to his client where there had been a ‘natural break’;
- Each of the solicitors’ bills covered a different and irregular period of time and there was no reason why a ‘natural break’ could not be ascertained by reference to one or more particular points of time;
- The first three bills were intended to be and were accepted by the client as being, in relation to the periods which they covered, complete and self-contained bills which the solicitors expected and intended that the client should pay, as in fact he did.
Applying the principles laid down in In Re Romer & Haslam, the court held that the first three bills were in fact statute bills and that the time limits for assessment under the Solicitors Act 1974 had long since passed. The court further determined that it would not order the assessment of those bills under its inherent jurisdiction, the client having long since paid them without demur.
Ralph Hume Garry (a firm) v Gwillim (2002)
In this case the court had to determine whether proceedings issued by the solicitors against the client for the non-payment of their bills should be struck out on the grounds that they failed to comply with the strict requirements laid down within section 69 of the Solicitors Act 1974.
The client, an experienced solicitor himself, instructed the solicitors to represent him in a dispute involving the partners of his firm. Bills were submitted to the client on a monthly basis and took the form of a final account for the work done during the relevant periods. In total, 23 bills were raised totalling £215,819.09. However, only £87,883.39 was paid and in due course the solicitors commenced proceedings to recover the outstanding balance.
In response, the client filed a defence and counterclaim, in which he alleged professional negligence and sought to set off his damages against the outstanding fees claimed. In addition, the client applied to strike out the claim on the grounds that the solicitors were not entitled to sue as they had not complied with the solicitors’ bills rules.
The application was rejected by Mr Justice Tomlinson at first instance and the client appealed. In doing so, and amongst other matters, the client alleged that the judge had been wrong in failing to decide that the solicitors’ bills were not gross sum bills on which the solicitors were entitled to sue.
Giving the leading judgment in the Court of Appeal, Lord Justice Ward observed that:
- While the question raised by the appeal was deceptively short and simple, the answer to it was anything but and required a review of the law dating back to Victorian times;
- It was to be regarded as good practice for solicitors to provide an adequate description of the work they had done in order to justify the charges made;
- A client could not establish a bill was non-compliant with the Solicitors Act 1974 for want of information in the bill, if he was already in possession of all the information that could be reasonably wanted for deciding whether or not to seek an assessment of the bill;
- While there must be something in the bill to indicate the ambit of the work, any inadequacies of description may be redressed either by accompanying documents or by other information already in the possession of the client;
- Provided the client is possessed of the knowledge he reasonably needs to decide whether or not to insist on an assessment of the bill, the solicitors will have satisfied the requirement for the bill to be bone fide complying with the Act;
- Solicitors had the right to submit a gross sum bill instead of a detailed bill, pursuant to section 64 of the Solicitors Act 1974 and, having done so, the client was entitled to require the solicitor to deliver, in lieu of that bill, a bill containing detailed items;
- It was unfortunate that section 64 of the 1974 Act did not require the client to be informed of his right to seek a bill containing detailed items, as well as the consequence of doing so, and of his entitlement to seek an assessment;
- A gross sum bill in contentious business will not be ‘bona fide complying with [the] Act’ if the client shows (i) that there was no sufficient narrative in the bill to identify what it was he was being charged for, and (ii) that he does not have sufficient knowledge from other documents in his possession or from what he has been told reasonably to take advice whether or not to apply for that bill to be assessed;
- The sufficiency of the narrative and the sufficiency of the client’s knowledge would vary from case to case, and the more that the client knows, the less the bill may need to spell it out for him;
- The interests of justice required that a balance be struck between protecting the client’s right to seek an assessment of costs and of the solicitors’ right to recover not being defeated by opportunistic resort to technicality;
- Here the bills in question were expressly stated to be for professional charges, did identify the matter to which they related and did identify the period of time which they covered.
Accordingly, the court held that as the judge at first instance had found upon a review of the evidence that there was a real prospect of the solicitors establishing that the client knew all he needed to know to be able to exercise his right to seek an assessment of costs, it would not be right to strike out the solicitors’ claim on the grounds that the underlying bills did not comply with the Solicitors Act 1974.
McLoughlin v Irwin Mitchell (2008)
In this case the court had to decide whether 20 interim invoices issued by the solicitors were statute invoices or payments on account and whether there were special circumstances justifying an extension of the time-limits for applying for an assessment under the Solicitors Act 1974.
The client had instructed the solicitors to act for him in a professional negligence claim against his former solicitors. During the course of their retainer, the solicitors raised 20 separate invoices and obtained a charge against the client’s home as security for their fees.
In due course, and after the Court of Protection had satisfied itself that the client was incapable of managing his own affairs as a result of mental ill health, a First General Order was made in favour of his daughter.
The solicitors subsequently commenced proceedings to enforce their legal charge. In response, the client commenced Part 8 proceedings seeking an assessment of the solicitors’ costs.
Sitting in the Supreme Court Costs Office, Master Simons observed that:
- With the exception of the final three invoices, all the solicitors’ invoices had been paid at least 12 months prior to the issue of the client’s claim and exceeded the time limit for applying for an assessment imposed by section 70(4) of the Solicitors Act 1974;
- While the solicitors’ standard terms and conditions clearly stated that interim invoices would be rendered before the conclusion of the matter, they also stated that (i) those invoices may not include all the costs incurred to the date to which the invoice was issued; and (ii) a final invoice would be rendered upon completion of the matter;
- The fact that the final invoice raised did not actually include any costs from outside the period that it was stated to cover, did not mean that the earlier invoices must have been statute invoices;
- Until the final invoice had been delivered, the client could not have known whether or not there would be any additional costs included in that invoice;
- There was no evidence to support the assertion that there was an express or an implied agreement between the parties that the interim invoices were statute invoices – the client did not know the difference between a statute and a non-statute invoice, or the effect and the consequences of such;
- Other than the disbursement only invoices, all the invoices stated that they were interim invoices on account;
- The invoices did not contain sufficient information on which to enable a client to obtain advice as to whether or not he should apply for a detailed assessment;
On this basis, the court concluded that all the invoices were demands for payments on account and not statute invoices and that, accordingly, the client had applied for an assessment within the statutory time-limits.
The court further held that, in any event, there were special circumstances which entitled it to extend the statutory time limits and that the court had inherent jurisdiction to order an assessment in the circumstances.
Parvez v Mooney Everett Solicitors Ltd (2018)
In this case the court had to determine whether a bill included within the case file that the solicitors had sent to the client upon request, constituted delivery of a statute bill upon which the client was entitled to apply for an assessment under section 70 of the Solicitors Act 1974.
Following a road traffic accident, the client instructed the solicitors under a Conditional Fee Agreement (‘CFA’) to represent her in a claim for damages for personal injury.
After a settlement was reached, the solicitors sent the client £1,410.75, representing the balance of the damages recovered after deduction of their success fee and an ATE insurance premium. Shortly thereafter the client instructed new solicitors, who requested and were sent a copy of the personal injury claim file. Amongst other documents, this contained a Bill of Costs dated 26 June 2016 (‘June Bill’), which her original solicitors had not previously sent to the client. This totalled £1,505.25.
At the client’s request, and in August 2016, the solicitors delivered a fresh Bill of Costs. This was in the total sum of £6,461.95. Having previously asserted the June Bill was not a statute bill, the client then alleged that the June Bill was a statute bill and sought to agree a date for delivery of it. However, in the absence of agreement, the client then applied for an assessment of the June Bill.
At first instance, District Judge Bellamy held that the June Bill was not a statute bill and had not been delivered. The client appealed.
Sitting in the High Court, Mr Justice Soole observed that:
- A document was not a bill of costs unless it was sent by the solicitor to the client as a demand or claim of the sum therein stated to be due;
- The court’s power to order a solicitor to deliver a bill of costs under section 68 of the Solicitors Act 1974, does not entitle the court to order (or the client to seek) delivery of a specifically identified document and thereby, to determine the terms and content of the solicitors’ demand or claim for payment;
- The client could be in no better position if the relevant document had come into his possession otherwise than in the character of a delivered bill of costs and there was no basis for treating it differently from a document which remained in the solicitors’ possession;
- Whether or not there had been any breach of the Solicitors Accounts Rules, it would not entitle the client to treat an undelivered bill of costs as if it had been delivered.
In these circumstances, and affirming the decision of the court below, the judge held that the June Bill was not a statute bill and had not been delivered to the client. Accordingly, it could not be the subject of assessment under section 70 of the Solicitors Act 1974 and the client’s claim would stand dismissed.
Laurence Sprey v Rawlison Butler LLP (2018)
In this case the court had to decide whether or not monthly bills delivered by the solicitors to the client under a Discounted Fee Agreement were statute bills and, therefore, subject to the time limits for assessment imposed by section 70 of the Solicitors Act 1974.
The solicitors were instructed to represent the client in a claim for professional negligence. Having initially acted under a private retainer, the solicitors subsequently acted under a Discounted Fee Agreement (‘DFA’) which provided that the client would pay 40% of the normal hourly rate if he lost the claim and a success fee of 50% of the normal rate if he won.
A series of bills were raised at the discounted rate, the last four of which went unpaid. In addition, and upon the client winning the claim, the solicitors raised a balancing invoice for the remaining 60% of the normal rate and later, an invoice for their success fee.
The client applied for an assessment of the bills relating to the DFA. At first instance, Master Rowley held that all the bills were statute bills and that the client was out of time under section 70(4) of the Solicitors Act 1974 for assessment. The client appealed.
Sitting in the High Court, The Honourable Mr Justice Nicklin observed that:
- Clause 11.1 of the DFA provided that the client had the right to an assessment by the court of the amount of the solicitors’ fees, success fee and/or disbursements which were payable under the DFA, by making an application under section 70 of the Solicitors Act 1974;
- The success fee could only be payable in the event of success and, unless the billable items referred to in clause 11.1 were read disjunctively, the right to challenge those items arose only at the end of the case;
- The client’s liability to pay crystallised on the happening of a particular event (success, loss or termination) and it was only at that point that the client became liable to pay at either the discounted or normal rate;
- Until the conclusion of the matter, the client would not know what rate was being charged and whether that rate was reasonable, and could not decide whether to exercise his right to seek an assessment;
- The fact that the balancing invoice sought payment of the remaining 60% of the normal rate, rather than the full normal rate less the discounted rate already billed, was of no consequence;
- Statute bills could not subsequently be amended, as was necessitated here by operation of the DFA which permitted additional charges where the claim was successful;
- In determining whether or not an agreement between the parties to treat the discounted bills as statutory bills was to be inferred, regard was to be had not only to the terms of the bills themselves but also to the terms of the DFA which they had entered into.
In the circumstances, the court held that the discounted bills were not statute bills but requests for payment on account or (more likely in the circumstances) Chamberlain bills and that no agreement between the parties to the contrary should be inferred. Therefore, the appeal was granted.
Vivek Rattan v Carter-Ruck Solicitors (2019)
In this case the court had to decide whether to grant the client an extension of time to apply for an assessment hearing of bills totalling £340,000, in circumstances where the client was also pursuing parallel proceedings against the solicitors for professional negligence.
The client instructed the solicitors to represent him in a mis-selling claim against his bank. The solicitors and counsel each acted under a Conditional Fee Agreement (CFA) which provided for a success fee of 100%.
In the event, and with the client’s authority, a settlement was reached on terms that the bank would pay US $500,000 to the client as damages and £340,000 to the solicitors as costs. Shortly thereafter, the solicitors delivered two bills to the client totalling £340,00 and comprising their fees (but no success fee), counsel’s fees (with no success fee) and an ATE insurance premium.
The client then applied for an assessment of costs pursuant to section 70 of the Solicitors Act 1974. On 23 April 2015 an order for assessment was made which directed, amongst other matters, that either party could apply for a hearing within three months of the date of the order.
Pursuant to the order, the solicitors served a bill of costs totalling £934,799.34. The client subsequently initiated a professional negligence claim, in relation to which court proceedings were then issued in April 2018. In December 2018, the solicitors applied to strike out the assessment proceedings. In January 2019, the client responded with an application to the court for an extension of time in which to request an assessment hearing.
Sitting in the Senior Courts Costs Office, Master Leonard observed that:
- There was a substantial overlap between the assessment and professional negligence proceedings which could have the undesirable consequence of the same issues being tried in two different forums at the same time;
- It was right to treat the client’s application for an extension of time as if it were an application for relief from sanctions;
- In challenging the costs that he had already paid to the solicitors, the client’s position was comparable to a party suing for a sum of money and it was for him to protect his position by complying with the orders made by the court;
- The family difficulties that the client had experienced were regrettable, but did not provide good reason for his failure to comply with the directions timetable that had been set by the court;
- The client’s status as a litigant in person at the time of applying for an assessment had no bearing upon the matter: the client could have applied for a hearing at any time or instructed solicitors if needs be;
- It was not incumbent upon the solicitors to file the required papers and pay the required hearing fee in order to allow the client to pursue his assessment, nor could the client have expected the solicitors to do so;
- The client had failed to understand that detailed assessment was not simply a process of reducing the solicitors’ billed costs, but was to establish a reasonable chargeable figure, which might be substantially above the actual billed figure;
- Here the client had to show that the costs and disbursements figure of £934,799.34 should be reduced below £340,000, which seemed unlikely;
- It appeared that the client had abandoned the assessment in favour of the professional negligence claim, only to realise that he needed to pursue the assessment after all, although this itself was not a good reason for requesting an extension of time.
In these circumstances, the court held that the client was not entitled to an extension of time to apply for an assessment hearing, that the solicitors’ costs would be assessed as billed and that it was unnecessary to consider the solicitors’ application to strike-out.
Further legal assistance
As will be apparent from the case examples set out above, application of the solicitors’ bills rules can be both a complicated and technical exercise. While we have endeavoured to simplify and summarise matters for ease of understanding, this article should not be regarded by clients as a substitute for specialist legal advice.