Yesterday, the Court of Appeal handed down judgment in Richard Slade & Co v Boodia  EWCA Civ 2667, resolving much of the confusion and concern that had fomented around the now reversed High Court decision and the issue of interim statute bills generally.
Richard Slade & Co acted for the Boodias between 2013 and 2016 under a retainer which included the following payment terms:
"Bills are rendered monthly in arrears. Our bills are detailed bills and are final in respect of the period to which they relate, save that disbursements (costs and expenses which we incur on your behalf) are normally billed separately and later than the bill for our fees in respect of the same period. Please do not assume, therefore, from a bill for our fees which does not refer to any disbursements that no disbursements were incurred during the period. The more usual situation is that disbursements will have been incurred and will be billed separately."
By the time the Boodias terminated the retainer in October 2016, the solicitors had delivered 61 invoices which were divided out between profit costs (totalling £141,287.70 plus VAT) and disbursements (£31,703.80 plus VAT). All amounts were paid save for the last four invoices.
In November 2016, the Boodias sought to have all the bills assessed under s.70 of the 1974 Act. Master James directed that there be a hearing of a preliminary issue, namely whether – by virtue of the bills being final for a period but relating to profit costs only – the bills were capable of being interim statute bills as opposed to account bills culminating in one final statute bill dated 6 October 2016.
Master James concluded that the various bills were account bills; they could not exclude disbursements within the period and add those in later by a separate bill. The solicitors appealed to the High Court, unsuccessfully – Slade J concluded that the Master was bound by statute as explained in authority to conclude that an interim statute bill must contain all costs for a period, including both profit costs and disbursements.
Allowing the appeal, Newey LJ (with whom Coulson and Haddon-Cave LJJ agreed) began by noting that the 1974 Act has its origins in the earlier legislation; the necessary formalities of a statute bill were designed to ensure that a client had sufficient information in order to take an informed decision to tax or not to tax (citing Ward LJ in Ralph Hume Garry v Gwillim  EWCA Civ 1500 at paragraph 57). The solicitor's ability to render bills was dependant on his contract with the client, and modern practice had developed whereby solicitors would make provision for interim billing.
Newey LJ dealt first with the provisions of the 1974 Act, which he concluded were neutral – they gave no indication as to whether profit costs and disbursements had to be billed together.
The Court then addressed the case of Bari v Rosen  5 Costs LR 851 which had referred to interim statute bills as "complete self-contained bills of costs to date". Newey J concluded that neither Bari v Rosen nor other cases which adopted this terminology were concerned with whether statute bills had to include both costs and disbursements, and to read the statement as requiring this was to attribute the words with a significance they do not have. Rather, the words merely indicate that the bill is not just a payment on account but "is intended to be complete and final as regards its subject matter" (paragraph 31, emphasis added).
Next, the Court addressed practicality and policy, noting that it was unsatisfactory for the solicitor to be unable to issue a statute bill until he had been invoiced for all disbursements incurred during the relevant period and thereby left to the mercy of the cooperation of others. Ultimately, a bill which contained profit costs only (as was common practice in the modern profession) would not necessarily fail the test of containing sufficient information to allow the client to make an informed decision as to whether to tax or not.
Newey LJ also rejected the respondents' fallback position, that the bill should contain all disbursements which had already been billed by the end of the relevant period.
The decision will be a source of relief to solicitors, for whom separate billing of profit costs has become a well established practice. Furthermore, it gives due and proper recognition to the foundation of the common law and statutory principles governing billing arrangements – the parties' agreement. In this case, the retainer clearly spelt out that profit costs and disbursements would be separate, so there was no risk of confusion on the client's part. As the Court of Appeal recognised, solicitors' practice has evolved as automatic billing has improved and solicitors and clients have become more flexible about the payment arrangements which they choose to adopt.
From the client's perspective, it is unlikely that the problems identified by the High Court would occur in practice:
- If profit costs were being assessed for a period prior to disbursements being billed, it is unlikely that the assessment would come on before other costs, invoices or other relevant evidence was gathered together for the purposes of assessment.
- The fact that a success fee has not been billed will not undermine the parties' agreement, the client's ability to assess the bill, or the Court's ability to consider the reasonableness of the underlying costs. If success fees had to be included, it would be impossible to render a statute bill until the end of a case. The Court of Appeal decision clarifies that the 1974 Act (which obviously did not contemplate CFAs) did not intend to and should not operate to curtail the parties' autonomy in such a way.
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