A client has succeeded in her appeal against an order refusing her the costs of her application to set aside a statutory demand served by her former solicitors.
According to a Lawtel report of Dunhill v Hughmans before Mr Justice Barling, the retainer was terminated due to the client’s belief that her solicitors had been negligent in relation to a dispute with her husband.
The solicitors claimed for their unpaid fees and summary judgment was entered for them. The client’s appeal was refused and an earlier stay of proceedings lifted. Although she sought permission to appeal, the solicitors served a statutory demand for the unpaid fees.
The appellant applied to the Court of Appeal for the stay to be re-imposed pending the oral renewal of her permission to appeal application and applied for the statutory demand to be set aside. Her application was granted, and the stay was re-imposed.
The appellant asked the solicitors to agree to set aside the statutory demand and to pay her costs of the set aside application. The solicitors offered to withdraw the statutory demand but refused to pay her costs. The chief registrar concluded that the solicitors had been entitled to serve the statutory demand since they had been awarded summary judgment and the initial stay had been removed; and that the appellant had been unreasonable to reject the solicitors’ offer. He refused to award the appellant the costs of her application. Earlier this year, the Court of Appeal allowed the appellant’s appeal against summary judgment.
The client contended that as the stay was in place and permission to appeal had been granted, the statutory demand should have been set aside under rule 6.5(4) of the Insolvency Rules 1986.
Barling J said the question was not whether the solicitors were entitled to serve the statutory demand – as the chief registrar had considered – but whether it was reasonable at that point. Lawtel said: “When the appellant put in her notice of appeal, it should have been clear to the solicitors that she would pursue her legal options exhaustively. There had been no need to serve a statutory demand before the outcome of a renewed oral application that the solicitors knew or should have known would be pursued.
“The solicitors must have appreciated that further costs would be incurred by their conduct; they had therefore acted unreasonably. In those circumstances the court was entitled to consider the question of costs and to exercise its discretion afresh. The appellant had not been unreasonable in refusing the solicitor’s offer to withdraw the statutory demand but not pay her costs. Accordingly, the chief registrar had failed to place sufficient weight on the appellant’s own offer which the solicitors had rejected.”
The judge found that the solicitors had acted unreasonably in not accepting the offer. The costs of the set aside application were awarded to the appellant.
The report added: “Had the withdrawal of the statutory demand not been agreed by concession, she probably would have succeeded on having it set aside under rule 6.5(4)(a). The court allowed an appeal on that issue. Although the solicitors had a costs application that had been stayed pending the outcome of the instant hearing, the court precluded an order being made for costs in their favour.”