Solicitors Act assessment not permitted of interim bills under discounted CFA
Monthly bills under a discounted CFA are not ‘statute’ bills capable of detailed assessment.
The High Court allowed an appeal against the decision of Master Rowley, in Sprey v Rawlinson Butler LLP  EWHC 354 (QB).
The principle issue in the appeal, decided in favour of the respondent solicitors (Rawlinson Butler) at first instance, was whether the monthly bills delivered by them to their client under a discounted CFA were 'statute bills' and therefore capable of detailed assessment under s.70 Solicitors Act 1974, as in consequence of the passage of time since their original service the appellant client had lost the right to seek a detailed assessment of some of those bills.
Rawlinson Butler acted for the appellant in a claim for professional negligence. From instruction to March 2013 they acted under a conventional retainer. Thereafter to September 2015, when the appellant instructed new solicitors, they acted under a discounted CFA. The appellant's claim was ultimately settled shortly after in October 2015, for £525,000 inclusive of costs.
The CFA provided that the appellant would be liable to pay Rawlinson Butler at discounted rates (40% of the normal rates) if he lost the claim. If he won, he was liable to pay them at their normal rates plus a success fee of 50%.
Rawlinson Butler billed the appellant monthly, at the full rate during the conventional retainer, and at the 40% discounted rate during the period covered by the CFA ("the 40% invoices"). In October 2015 Rawlinson Butler billed the appellant for the balance between the normal rate and the discounted rate ("the balancing invoice") and, in January 2016, for the success fee. The appellant paid all of the bills apart from (a) the last four of the 40% invoices, (b) the balancing invoice and (c) the success fee.
On application for an order for assessment of the bills, Master Rowley found that the 40% invoices were interim statute bills. On that basis, the bills rendered between March 2013 and September 2014, which had been paid more than 12 months before the application was issued, were out of time and no order could be made for their assessment. The Master ordered that the bills dated from September 2014 should be the subject of assessment. In respect of the balancing invoice he directed that, for the period covered by the time-barred bills, the assessment would be limited to the reasonableness of the hourly rate (and not the reasonableness of the time/work done).
The appellant challenged the Master's decision on three grounds, contending that the Master was wrong to find:
i)that the 40% invoices were interim statute bills because such invoices "were not intended to be and could not have been final bills in respect of the work covered by them";
ii)that Rawlinson Butler had the right to deliver interim statute bills under the CFA; and
iii)that the balancing invoice could not be assessed by reference to the reasonableness of the work done where that work was covered by earlier (time-barred) invoices.
The third ground only arose if the appellant failed with the first two grounds.
The decision turned on the Master’s reading of two clauses of the CFA: clauses 4.3 and 11.1.
Clause 4.3 stated: “Rawlison Butler LLP will bill the Client at the Discounted Rates on a regular (usually monthly) basis, together with any Disbursements as and when incurred. All such invoices are payable by the Client upon delivery. The amounts billed in this way will be payable by the Client regardless of the outcome of the Claim.”
Clause 11.1 stated: “The Client has the right to an assessment by the court of the amount of the fees, Success Fee and/or Disbursements which are payable by the Client under this Agreement, by making an application under section 70 of the Solicitors Act 1974...”
Master Rowley had found that, read together, clauses 4.3 and 11.1 of the CFA provided for the delivery of interim statute bills. He rejected the appellant's argument that clause 4.3 was ambiguous and should be read, applying the contra proferentem rule, as not providing a right to deliver interim statute bills. The balancing invoice was, the Master held, akin to an invoice for a success fee in a CFA; it was not adjusting the underlying bill, it was seeking the payment of a further sum the calculation of which was based on the original (unadjusted) 40% invoices.
Mr Justice Nicklin did not agree with the Master's reading of these clauses and his conclusion that the CFA permitted Rawlinson Butler to render monthly statute bills. In his judgment, clause 4.3 was neutral as to whether the 40% invoices were statute bills or not. The agreement to pay at the 40% rate was equally consistent with the appellant making payments on account at that rate. He was satisfied, however, that clause 11.1 gave a clear indication that the 40% invoices submitted by the respondent were not statute bills.
Given that the success fee could only by payable in the event of success (i.e. at the conclusion of the case, whether or not the CFA had been brought to an end at an earlier point), Nicklin J determined that “unless the three billable items referred to in this clause are read disjunctively, the right to challenge those items arose only at the end of the case. That would mean that the interim bills were not statute bills but requests for payment on account or (more likely in the circumstances) Chamberlain bills.”
Further support for Nicklin J’s conclusion came from the wording of clauses 5.1 and 6.1, which provided for what would happen in the event that the client won or lost the claim respectively, with both clauses referring to fees being payable upon the final result.
Furthermore, at para 25 he added, “At the heart of an assessment is whether the sum charged by the solicitors to the client is reasonable. The charge for work done at 40% of the normal rates might well be reasonable, but at 100% not reasonable. A client would not know until the end of the claim (or earlier termination) at which rate he was being charged. On [counsel for Rawlinson Butler’s] construction of the CFA, the appellant progressively lost the right to challenge the bills as the claim went on.”
This construction of the CFA is consistent with the principle that a statute bill cannot subsequently be amended. The effect of the clauses Nicklin J identified was that the 40% invoices were liable to be later changed. What was ultimately to be paid for the work that was the subject of any 40% invoice would not be known until the appellant won or lost the claim or terminated the CFA.
While solicitors might fear that this construction would mean that they are not entitled to be paid under such a CFA i.e. they lack an enforceable right to payment of their fees (under s.69 Solicitors Act 1974), the consequences of this principle are not as harsh as they might appear and Nicklin J assured that “It does not mean that the Respondent was not entitled to some form of payment. The Respondent could always insist that the Appellant make payments on account under the express terms of the Client Care Letter.”
Judgment - http://www.bailii.org/ew/cases/EWHC/QB/2018/354.html