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Cite as: [2007] EWHC 90069 (Costs)

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Neutral Citation Number: [2007] EWHC 90069 (Costs)
Case No: 06.P8.431

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

Clifford's Inn, Fetter Lane
London, EC4A 1DQ
11 January 2007

B e f o r e :

Master Simons
____________________

Between:
ANNE REID BARNES (1)
DONALD McKENZIE BARNES (2)
Claimants
- and -

MESSRS STONES (A FIRM)
Defendant

____________________

Mr Charles Bennett (instructed by Recompense Solicitors) for the Claimants
††Katie Scott (instructed by Messrs Stones) for the Defendant
Hearing date: 18 December 2006

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Master Simons:

    Introduction

  1. By this application issued on 25 July 2006, the Claimants seek the following Orders:
  2. (1)†††††††† An Order pursuant to Section 70(3) of the Solicitors Act 1974 that there are special circumstances to the making of the orders sought hereby.
    (2)†††††††† An Order in standard form for the detailed assessment of the bill dated 15 April 2005 and delivered by the Defendants to the Claimants.
    (3)††††††† An order dealing with the costs of this application.
  3. This matter was originally listed for hearing before me on Tuesday 15 August 2006, but prior to that date the parties agreed that the application should be adjourned to enable witness statements, skeleton arguments and bundles to be served and filed.
  4. Prior to the hearing of this application, two witness statements have been filed by Mrs Barnes, one witness statement from the Claimants' solicitor, Mr Matthew Roddan, and one by Mr Frederick Hass, the consultant of the Defendant firm.† I have also received a bundle of correspondence together with skeleton arguments from Mr Bennett for the Claimants, and from Ms Scott for the Defendants.† I have read all of this documentation.
  5. Before dealing with the arguments relating to special circumstances, I must deal with the basis of the application of itself.† The history of the matter is that in 1999 the Claimants instructed Mr Hass to continue to act on their behalf in connection with a dispute relating to a right of way.† During the course of the retainer invoices were rendered by the Defendants to the Claimants on 30 November 1999, 8 June 2000, 19 April 2001, 22 October 2001 and 31 July 2002.† These five invoices ("the original invoices") totalled £23,996.75, (which included £3,099.00 VAT).
  6. It appears that there was some dissatisfaction on the part of the Claimants with the Defendants and in July or August 2002, they changed solicitors and instructed Mr Roddan, whose firm was then called Eastleys.† On 5 August 2002, Eastleys wrote to the Defendants with regard to the outstanding costs which the Defendants were claiming from the Claimants, and requested copies of all previous accounts, relevant office and clients' ledgers and copies of time records.† This letter began a course of correspondence relating to these costs that has continued ever since and as well as dealing with the issue of detailed assessment, has also involved correspondence with the Law Society's Customer Complaints Service ("LSCCS") to whom complaint was made on the Claimants' behalf. ††In a letter dated 27 August 2004, from the LSCCS to Mr Roddan, the case worker at the LSCCS wrote:
  7. "It seems that Mr and Mrs Barnes are out of time to apply for an assessment of the original bills and so you have reached an agreement with Stones whereby they will render a new bill which can be assessed".
  8. Both Mr Bennett and Miss Scott before me agreed that the original bills had been withdrawn.
  9. After a considerable delay, to which I will refer later on in this judgment, the Defendants wrote to Messrs Eastleys on 15 April 2005, stating:
  10. "We now enclose the solicitor and client bill of costs in this matter receipt of which please acknowledge".

    That I am told is the bill of costs, to which this application relates.

  11. As I have indicated to the parties, I do not regard this bill of costs as one that complies with the provisions of the Solicitors Act 1974.† Consequently I do not have the power to order a detailed assessment of it.
  12. This document is not a bill of costs but is a breakdown.† It is in the form of a breakdown that is normally lodged once an order has been made for a detailed assessment of a bill, and follows precedent P of the Schedule of Costs precedents in the Costs Practice Direction 48 PD.23.1.† It is not addressed to the client.† It does not contain any VAT number and it does not contain any information concerning the clients' right to have their costs taxed.† It was not delivered to the Claimants, and although it was signed by Mr Hass on behalf of the Defendants, Mr Hass is not a partner in the firm as he is a consultant and indeed the word partner had been deleted underneath the signature on the endorsement to the bill.† Consequently this document does not comply with the requirements of Section 69 of the Solicitors Act 1974 and is therefore unenforceable by action.
  13. I therefore do not consider that I have power to make an order for detailed assessment of this document.† In my judgement, as, by agreement between the parties, the previous bills have been withdrawn, it seems to me that no statutory bill has been rendered by the Defendants to the Claimants, to which they can avail themselves of their right to seek detailed assessment under Section 70 of the Solicitors Act 1974.† If that is the case then the question as to whether or not there are special circumstances relating to this bill becomes redundant.
  14. Notwithstanding this decision, both Mr Bennett and Miss Scott have asked me to deal with the question of special circumstances in the event of there being a successful appeal against my decision on this point.
  15. Background to "Special Circumstances"

  16. If the document served by the Defendants on 15 April 2005 is a bill that can be assessed, then it is acknowledged by the Claimants that as more than 12 months has expired from the time it was delivered (if it was delivered) to the Claimants then an order for its detailed assessment can only be made in special circumstances.
  17. The facts, which in the most part are agreed between the parties, are set out in the correspondence between the parties exhibited to the witness statement of Mr Roddan.† His firm was instructed by the Claimants in early August 2002. On 5 August 2002 he requested information from the Defendants about the costs which the Defendants had claimed were outstanding.† The Defendants responded on 12 August 2002, and suggested that they would now prepare a detailed narrative bill providing the Claimants with all necessary information, although they did suggest "...they will bear in mind that the detailed bill is likely to be higher than either the concessionary or the discounted figure mentioned in our last letter".
  18. The response to that letter was a letter from Mr Roddan stating that he awaited a detailed breakdown of the costs.† After many further reminders sent by Mr Roddan and complaints made by him on behalf of the Claimants to the LSCCS, a breakdown of costs was sent by the Defendants to Eastleys on 5 June 2003, some ten months after it had been agreed that it would be provided.† This breakdown consisted of a summary of the work that was carried out, detailed the number of letters and the hours spent.† The final sentence of this breakdown continued:
  19. "The total costs as assessed above is £19,900 plus VAT plus disbursements".

    I have noted that the original bills amounted to £15,710.00 plus VAT and disbursements.

  20. Mr Roddan's response to the breakdown was to request "a copy of your final account ..." The Defendants responded on 26 June 2003 by stating that no final account had been prepared as they were waiting to see whether or not the Claimants were going to accept a proposal with regard to their costs stated in the breakdown. They stated:
  21. "... It appears to us that the correct course is for a †detailed bill to be submitted based on the breakdown we have prepared.† This will be dealt with by costs draftsmen.† On the assumption that your clients will not accept the figures in such bill the appropriate course would therefore be for the bill to be subject to a detailed assessment in the County Court".
  22. On 12 August 2003, Mr Roddan responded by stating:
  23. "We confirm that we now have our clients' instructions to proceed on that basis and we await your detailed bill to be subject to Detail Assessment if not agreed".
  24. For the next 20 months, the parties continued to correspond with Mr Roddan pressing for the delivery of the bill of costs for detailed assessment.† Mr Roddan made further complaints to the LSCCS with regard to the delay in submitting the bill.
  25. On 15 April 2005, the Defendants enclosed "the solicitor and client bill of costs" to which I have referred earlier in this judgment.† Mr Roddan's response to this was to request the return of files held by the Defendants. Again the LSCCS became involved before the files were delivered to Mr Roddan.
  26. On 29 September 2005, the Defendants wrote to Mr Roddan stating:
  27. "As we understand the position the procedure is laid down in Section 56 of the Practice Direction which supplements Rule 48.10 of the CPR. †It appears to us that this section requires the paying party to be the claimant in the costs action.† If that is correct then it is your client who should begin necessary process for obtaining an order for assessment".†
  28. I am told by Mr Bennett that this letter was not received by Mr Roddan until January 2006.† In a letter dated 26 January 2006 to LSCCS, Mr Roddan stated:
  29. "Can we please leave matters in your hands to deal with these two points whilst in the meantime we will prepare and commence Part 8 proceedings".
  30. The Part 8 proceedings were commenced on 25 July 2006.† Both parties accept that not withstanding my judgment with regard to the "bill of costs," that if it was a valid bill, it was delivered on 15 April 2005, and consequently more than 12 months had elapsed from delivery of the bill by the time the Claimants issued their application for detailed assessment.
  31. The Claimants' Submissions

  32. Mr Bennett submits that there are special circumstances and that the correspondence between the parties on the issue of the detailed assessment of the Defendants' bill, both before and after the rendering of the bill, indicated an agreement that there would be a detailed assessment of those costs.† Time was never made of the essence of that agreement.† The Defendants initially agreed or accepted that they would commence the detailed assessment proceedings.† It was only in their letter of 29 September 2005, that they stated for the first time that it was for the Claimants to commence proceedings and not the Defendants.† There was no condition, expressly or implicitly, imposing a time limit for the Claimant to commence proceedings or to the effect that time was of the essence.† The Defendants did not make time of the essence.† There was an agreement that proceedings for assessment should be commenced within a reasonable time.† The fact that they were commenced more than 12 months after delivery of the bill does not discharge the agreement or release the Defendants from that agreement.
  33. Mr Bennett also submitted that no assertion had been made by the Defendants after the expiry of the 12 month period for commencing detailed assessment proceedings that time had expired. The parties had corresponded in May and June 2006 †on the basis that there was going to be a detailed assessment.† The Defendants thereby acknowledged the continuing entitlement to assessment and had waived any failure to apply within the 12 month time limit.
  34. With regard to the delay in commencing proceedings, Mr Bennett pointed out that it was only in January 2006, some 9 months into the 12 month period, that the Claimants received indication from the Defendants, contrary to what the Defendants had previously stated, that the Defendants were not going to commence detailed assessment proceedings and it was up to the Claimants to do so.† Thereafter the Claimants' solicitors did not receive the necessary file of papers until 27 March 2006.† Until then the Defendants had been exercising a lien.† It was the actions of the Defendants which made it difficult for the Claimants to have issued the proceedings within the 12 month period.
  35. A further special circumstance is the considerable delay on the part of the Defendants.† It was 10 months before they provided a breakdown of the bill and it was almost three years after they had been dis-instructed by the Claimants that the Defendants finally served what purported to be a final bill.† This, in Mr Bennett's submission must be a special circumstance which the Court should take into account in permitting a detailed assessment of this bill.
  36. Mr Bennett submitted that I should take into account the shortness of the period of delay over and above the 12 months' time limit.† The delay was just over three months and indeed had the claim been issued within the 12 month period and served within the four months allowed by rule 7.5 of the CPR †the position as far as the Defendants were concerned would be the same.
  37. A further circumstance should be taken into account was the fact that 75% of the bill had in fact been paid.
  38. Mr Bennett submitted that there were fundamental issues with regard to the bill that made it necessary for there to be a detailed assessment.† There are clear issues of fact with regard to the charging rate, which if found in the client's favour, would have a significant effect on the amount of bill.† Furthermore, the bill shows a considerable amount of unrecorded time the charge for which equates to approximately 23% of the bill.
  39. Mr Bennett's final submission was that it was a special circumstance that the Defendants had failed to comply with professional standards, in that they had failed to provide the Claimants with a client care letter in accordance with Practice Rule 15 of the Solicitors Practice Rules 1990.
  40. The Defendant's Submissions

  41. Miss Scott submitted that there was no agreement between the parties that there should be detailed assessment relating to the bill.† She conceded that the Defendants' expected there to be such an assessment, as they did not anticipate any agreement with regard to the costs, but that was not the same as agreeing that there should be an assessment.† It was made clear by the Defendants that is was for the Claimants to decide whether they were going to dispute the bill.† Mis Scott conceded that up until September 2005, both parties had assumed that it was for the Defendants to make the application to the Court but only if the Claimants wanted to dispute the bill.
  42. If there was an agreement that the bill should be assessed, then there was no express or implied agreement that the Defendant was to submit to a detailed assessment unconditionally. And at no time did the Defendant either expressly or impliedly agree to forego the protection afforded to them by the time limits set in Section 70 Solicitors Act 1974.† The fact that the Defendant did not expressly inform the Claimants that they would invoke the protection of the time limits of the Solicitors Act 1974 does not alter this, especially where the Claimants had the benefit of their own legal advice.
  43. Whilst the Defendants accept that there was a delay on their part, both before and after the service of the bill, this is not a special circumstance.† Even if there was delay on their part since September 2005, that delay of itself did not prevent the Claimants issuing their claim for detailed assessment within the 12 month limit.
  44. Miss Scott also submitted that the fact that part payment had been made, that there were issues relating to the hourly rate and unrecorded time, and that there was breach of the Solicitors Code were not, either taken separately or together, special circumstances.
  45. The Law

  46. There appears to be no hard and fast rule as to what are special circumstances as each case must stand on its own circumstances.† What constitutes special circumstances is a matter of discretion for the Costs Judge.
  47. Both parties referred me to the judgment of Mr Michael Briggs QC, in Arrowfield Services Ltd v BP Collins (a firm) [2003] EWHC 830, which was delivered on 26 March 2003.† In that case the learned Judge considered the question of special circumstances in a case, which Mr Bennett submits, was very similar to this.† In that case the Judge identified the issue as to whether, as a consequence of correspondence between the parties, there had been an arrangement or a clear understanding as to the question as to whether or not there should be a detailed assessment, and if so, in what circumstances. †On the facts of that case the Judge decided, notwithstanding that there was a delay in applying for a detailed assessment, where the solicitors had agreed that there should be a detailed assessment and had not made time of the essence that agreement of itself was a special circumstance to permit a detailed assessment outside the time limits.
  48. Miss Scott submitted that the facts of this case were different to the facts in Arrowfield in that there was never any agreement for there to be a detailed assessment, and even if there was an agreement there is no evidence that it was unconditional.† The Claimants knew three months before the expiration of the time limit that it was for them to apply for the detailed assessment, and the Claimants had the benefit of legal representation.
  49. What the learned Judge did state in his judgment in Arrowfield was the following:
  50. "36.†††††††††††††††† Was the existence of such an agreement or arrangement at the time of the hearing before the Master, either alone or taken together with any other matters, sufficient to constitute special circumstances under Section 70(3)?† In my judgment it was, and it was even in the absence of any other compelling factors.† I reach that conclusion for the following reasons.† Section 70, as it seems to me, and in particular the time limits contained in Section 70, are there primarily, if not exclusively for the protection of solicitors from exposure for what in 1974 was called taxation and is now called the detailed assessment of their bills and in particular from exposure to such assessments at a time separated by any considerable distance from the delivery of those bills.† The reasons for the need for that protection are obvious:† memories fade and time records may not be kept.† It is essential that the matter be determined quickly if it is to be the subject of a court determination.†
    37.†††††††††††††††††† By contrast, I find it difficult to read into Section 70 any powerful public interest in restricting the detailed assessment of solicitor's bills by reference to time separate from the need to give appropriate protection to them.† In particular, clients, or the parties chargeable, have a right to assessment providing that they apply within one month, so that the section cannot be easily categorised as one designed to keep the court's workload under manageable control.
    38.†††††††††††††††††† It follows, in my judgment, that if parties come before the Court on an application for a detailed assessment in circumstances where there subsists an agreement that there should be an assessment to which the solicitor has consented, and from which he has not freed himself in the manner which I have described, or in some recognisable manner, that is as powerful special circumstances as it is possible to conceive for ordering a detailed assessment.† He has apparently agreed that the protection given to him by the time limits should not apply because he has agreed that the assessment should take place, in this case as I have found, unconditionally".
  51. For me to decide that there are special circumstances, I do not consider that it is necessary for me to make a specific finding that there had been an unconditional agreement between the parties that there should be a detailed assessment.† I have to look at the circumstances of this particular case and then it is a matter for me to exercise my discretion as to whether or not these constitute special circumstances.
  52. In this case, †if there was not an agreement that there should be a detailed assessment there was certainly an understanding to that effect between the parties.† I am satisfied that up until September 2005, both parties were under the impression that it would be the Defendants who would apply for a detailed assessment of this bill.† In the final paragraph of their letter to the Claimants' solicitors of 18 September 2003, the Defendants stated:
  53. ".. We would point out that the arrangements for assessment of bills is a matter for which this firm is responsible whatever the office arrangements for the consultant dealing with this matter are.† We have instructed our normal costs draftsman to deal with the matter within the time frame mentioned to you earlier and if this is extended we shall inform you".
  54. On 31 January 2005 the Defendants stated in the final paragraph of their letter of that date:
  55. "We therefore intend to submit the draft bill to you for consideration at the time mentioned above.† Thereafter the bill will be lodged for assessment on the assumption that your client will wish to dispute it".
  56. Consequently there was clear indication that the Defendants intended to apply for a detailed assessment of their bill.† It was only by their letter of 29 September 2005 that they indicated to the Claimants' solicitors that they were not going seek the detailed assessment and that it was up to the Claimants to do so.† I have noted that the Defendants did not qualify this statement by suggesting that the Claimants should only apply for a detailed assessment if they wished to do so.† It is unfortunate that the Claimants' solicitors failed to challenge the Defendant's erroneous interpretation of the Rule as there is no reason why a solicitor should not seek a detailed assessment of his own bill.
  57. Furthermore it ill becomes the Defendants to seek to evade to consequences of a detailed assessment by invoking a claim of delay, where they themselves have been responsible for such a substantial delay in firstly preparing a breakdown, and secondly, preparing a bill for assessment.
  58. The principles set out by the Learned Judge in Arrowfield clearly apply to this case. In my judgment, the understanding between the parties that there should be a detailed assessment coupled with the delay on the part of the Defendants, in providing a breakdown and a "bill", constitute special circumstances that entitle the Claimant to apply for a detailed assessment outside the 12 month time limit.
  59. With regard to the other reasons, such as the fact that three quarters of the bill had been paid, that there were errors with regard to charging rates, that there had been substantial unrecorded time and there had been a breach of professional standards, I agree with Miss Scott's submission that they do not of themselves constitute special circumstances as these are matters which would be raised and be dealt with at any detailed assessment.
  60. I do not consider that the Claimants have been best served by either firm of solicitors involved in this case.† By the time that there is a detailed assessment almost five years will have elapsed since Mrs Barnes asked her new solicitors to query the bills that has been rendered to her.† It appears that neither firm of solicitors has taken the trouble to understand either the Solicitors Act 1974 or the relevant rules and practice directions in CPR.† As I have indicated, the Defendants have been responsible for quite an unacceptable delay.† However, there are provisions in the Solicitors Act that enable a client to proceed expeditiously with an assessment of a bill rendered to them by a client.† Where there has been delay in serving a bill, section 69 enables the client to seek an order for the delivery of the bill, and section 70 enables the client to apply for a detailed assessment.† Had those provisions been invoked by the Claimants' present solicitors I have no doubt that this matter would have been disposed of long ago, at no doubt, at considerably less expense to the client.† This detailed assessment should proceed without further delay, but as I have indicated, my powers are considerably limited by the fact that there is not in existence any statute bill which can be assessed.† Rather than incur the Claimants in further delay and expense by dismissing this Claim and making the Claimants start again it seems to me that the appropriate course of action would be for the Defendants to serve a statute bill forthwith and for the Claimants to then apply for the Claim Form to be amended to change the date of the bill to be assessed.
  61. I propose handing this judgment down on Thursday 11 January 2007 †at †10.00am in room 2.22 at SCCO when I will give further directions with regard to the course of the detailed assessment.† As I indicated to the parties at the hearing I propose reserving the costs of this application to the detailed assessment.
  62. I would anticipate that by the time this judgment is formally handed down a statute bill will have been served and that the parties can agree directions and I would refer them to precedent L of the Schedule of Costs Precedents shown in CPR 48 PD.22 and to the directions referred to in CPR 48.10 when preparing a draft order for formal detailed assessment and for directions.†† If directions can be agreed between the parties and neither party wishes to make any formal application, then it will not be necessary for the parties to attend before me when I hand down this judgement.† If any formal application is to be made then the party making the application must give notice to both the Court and to their opponent of any application that they wish to make.
  63. ADDENDUM

    ††††††††††† Since the dictating of this judgement I have received further written submissions from Mr Bennett with regard to my decision that there is no bill in respect of which there could be a detailed assessment.† I understand that he has sent a copy of those submissions to Miss Scott.

    ††††††††††† In view of the terms of this judgement and the directions that I have given I think that these submissions are now somewhat academic, but I thank Mr Bennett for bringing the case of In re Goyne(1851) 14 Beavan 56 to my attention. However, I am not persuaded that Mr Bennett's further submissions change my views as case law on the subject has moved on considerably since 1851 (see the discussion in paragraphs 7C-104-107 2006 White Book) and Mr Bennett's reliance on the decision in Goyne would seem to imply that any document can be regarded as a bill, provided that the client waives any formal requirements.† In this particular case, is it suggested that, provided they waived the statutory requirements, the Claimants could have sought a detailed assessment of the document served by the Defendants on 5 June 2003?† In any event the position in Goyne was that the bill was unsigned.† The bill in this case had more defects than that.


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