Menzies V Oakwood Solicitors – Protecting Solicitors from old Clients bringing claims for their Deductions

I’m sure since Jackson came along in 2013 and turned the world of Personal Injury upside down, many Firms have encountered some form of previous Clients trying to bring claims against the Firm to recover the Damages deductions taken.

I know for us here at Oakwood Solicitors, we have seen the same and spent a lot of time changing and adapting our processes to protect the Firm from these Solicitor Act Assessment claims being brought from previous clients after the expiry of the 12 month period of limitation within the Act.

I have recently attended the Court of Appeal in our case of Menzies V Oakwood Solicitors Limited. Mr. Menzies was an old client of the Firm who we conducted an RTA case for him to a successful outcome and then under our retainer we deducted a percentage of his damages to cover our shortfall in costs.

Mr. Menzies was given a detailed Retainer at the outset of the claim with all information in about the deduction and the Solicitor Act Assessment process of challenging his Solicitors fees. He was then given a Statute Bill at the end of his case that explained all the costs of his claim, the amount recovered from the Defendant and the shortfall in the Firms costs.

Due to the level of damages Mr. Menzies successfully recovered from the work of Oakwood’s Fee Earners, his 25% cap of Damages was a high Sum. The full amount was not taken from Mr. Menzies, as the shortfall in costs was less than 25% of his damages, so Oakwood took the shortfall amount as per the Retainer with Mr. Menzies.

Some 20 months after the case was concluded, Mr. Menzies instructed the Firm of JG Solicitors to pursue a Solicitor Act Assessment for him to challenge the amount of fees he paid Oakwood as a deduction from his damages. I deemed Mr. Menzies was Statute Barred in bringing his case, as it had been 12 months since payment of the Bill had taken place. I made an Application to this effect against the Solicitor Act Assessment Claim brought by Mr. Menzies.

This case so far has had three Hearings.

At the First Hearing before Cost Judge Rowley, he agreed that Mr. Menzies had brought the claim out of time and asserted he was Statute Barred by section 70(4) of the Solicitor Act 1974.

JG Solicitors appealed this decision and the same went before Mr. Justice Bourne in November 2022. Justice Bourne granted the Appeal and asserted payment was not effected by a settlement of account. In essence he asserted the Client had not made payment for the 12 month time limit to start to run under the Act as he asserted Oakwood had not obtained agreement specifically from Mr. Menzies for the Deduction in order to demonstrate that the account was settled. He said:

“On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.

“In those circumstances I have concluded that payment was not effected by a settlement of account. The appeal will therefore be allowed.”

Now this Judgment did not sit well with Oakwood. The interpretation of the Act by Justice Bourne was not correct in our opinion, and we sought permission to the Court of Appeal on the decision.

We went before the Court of Appeal on the 5^th July 2023. Oakwood had instructed Craig Ralph and Erica Beford of King’s Chambers to advise and advocate on this matter. Both are very knowledgeable in these types of claims and have provided a great service in handling the claim brought against our Firm.

The question before the Court of Appeal was what amounts to payment of the Bill in accordance with section 70(4) of the Solicitor Act 1974. Sir Geoffrey Vos, Master of the Rolls, Lord Justice Lewison and Lady Justice Smiler were presiding over the case.

If payment in this case has taken place, then the claim by Mr. Menzies has been brought out of time. The facts and interpretation of the claim all revolved around what was payment, when did it take place and when did the 12 month limitation period start to run. In making their decisions the Judges referred to:

• The Retainer between Mr. Menzies and Oakwood Solicitors
• The accompanying Client Care Documents sent with the Retainer including the Terms of Business
• The correspondents sent to Mr. Menzies at the time of acceptance of the Damages offer
• The Correspondents and Bills sent to Mr. Menzies during the cost negotiation of the claim and the final bill of the matter.

The Appeal was successful and Mr. Menzies was found to be Statute Barred from bringing his claim. The following paragraphs are taken from the Judgment at the Court of Appeal:

The only questions in this appeal concern, as we have said, what is required by section 70(4) to constitute “payment” and whether those requirements have been satisfied. In our judgment, the use of the phrase “settlement of the accounts” should no longer be used in this context. It is not a phrase that is used in section 70.

Its meaning is unclear, and its origin lies in cases in which there was no written contract of retainer. Nowadays, solicitors and clients normally enter into a written contract of retainer, and in some cases they are legally required to do so.

The phrase used in the statute is “payment of the bill”. We agree with the view expressed in Hemming that the action of payment of a solicitor’s bill ought to be no different to the action of payment of any other bill. We are content to adopt the meaning proposed by Aldous LJ in Gough, namely that payment for the purposes of section 70 is a transfer of money (or its equivalent) in satisfaction of a bill with the knowledge and consent of the payer.

In order for a transfer of money to be in satisfaction of a bill, there must be a bill to be satisfied. A “bill” in this context means a bill that complies with the requirements of section 69. The delivery of a compliant bill will give the client the necessary knowledge.

The requirement of consent does not, in our view, require that consent be given after the delivery of the bill, if the client has already validly authorised the solicitor to recoup his fees by deduction from funds in his hands.

What the client needs to consent to, in order for payment to take place, is “the transfer of money”, not necessarily the precise amount to be transferred. We reject the submission that the client must agree to a deduction quantified in pounds and pence. It is the process of assessment that fixes the precise amount that the client is required to pay.

The statute itself lays down the timetable, which is triggered by the delivery of a compliant bill. It is wrong in principle for judge-made law to qualify that timetable by the introduction of such indeterminate concepts as “a reasonable time” after delivery of a compliant bill. Either payment has taken place, or it has not.

It must not be forgotten that, even if money has been transferred with the consent or authority of the client, the client still has the right to challenge the precise amount through the medium of section 70, subject to the time limits laid down in the statutory timetable. That right exists whether or not the client has agreed the precise amount, whether before or after the transfer.

Whether the client has authorised the solicitor to recoup fees by way of a deduction from funds in hand is a question of interpretation of the written contract of retainer. In our judgment it is clear that the CFA in this case, and its accompanying documents, specifically authorised the Solicitors to recoup their fees out of the Client’s compensation, up to a maximum of 25% of that compensation. Payment of the bill took place when, after delivery of the bill, the Solicitors made that deduction. It follows, in our view, that payment of the bill took place more than one year before the bill was challenged and that, consequently, the court’s power of assessment was barred by section 70(4).

This is a great result for Solicitor Firms. The essential points to take away from this decision are:

• Ensure you have a detailed Retainer and accompanying letters to the Client at the onset explaining the deduction to be taken from Damages and the Client’s right to have these assessed;
• Ensure you send detail letters and authorities to the client at the point of accepting the Damages offer explaining the amount of deduction you will be taking from the Client’s Damages and ensure they send written confirmation accepting the offer with the deduction been taken.
• Ensure you send the client a compliant section 69 Statute Bill for payment once you have determined the level of costs and amounts owed for the case by the Client under the Retainer.
• As a general point, I would also include the Client’s right to challenge the Bill in your letters and Statute Bill to the Client so they are informed of their rights under the Solicitor Act.

The story is not at the end, and JG Solicitors have confirmed they will be seeking permission to Appeal the decision.

However, the Judgment currently stands and gives Solicitor Firms the reassurance of knowing if the Client has all information from the start, agrees the settlement of damages knowing their will be a deduction from the same to cover costs and is sent a compliant Bill at the conclusion of the case before payment takes place, the time limits under the Solicitor Act will start to run.

As a final point on their Judgment, the Judges asserted the following:

This court has previously said in Belsner that the 1974 Act, the wording of which has barely changed in many relevant respects since the Solicitors Act 1843, is in need of reconsideration. We repeat that view. The world of 2023 is a far cry from the early days of Queen Victoria’s reign. The balance between the protection of consumers on the one hand and certainty on the other needs to be re-evaluated in order to produce a system fit for the current century.

There maybe some reforms on the horizon to help Solicitor Firms have better clarity on the process of deductions from damages on case and see an end to this type of litigation.

Further reading

The Law Society Gazette’s coverage

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