A master was wrong to find that monthly bills delivered by a solicitor to his client under a discounted conditional fee agreement (CFA) were statute bills, the High Court has found.
As a result of the decision of Master Rowley (pictured), the client lost the right to seek a detailed assessment of some of those bills.
In Sprey v Rawlison Butler LLP  EWHC 354 (QB), the Sussex law firm acted for Laurence Sprey in a professional negligence case, initially under a conventional retainer and then, for two and a half years to September 2015, under a discounted CFA. This provided that the claimant would pay the firm 40% of its normal rates if he lost the claim; if he won, he would pay the normal rates plus a 50% success fee.
The case eventually settled for £525,000 after the claimant had parted company with the solicitors.
Rawlinson Butler billed Mr Sprey monthly, at the 40% discounted rate during the period covered by the CFA. In October 2015, it billed him for the balance between the normal rate and the discounted rate and, in January 2016, for the success fee.
Mr Sprey paid all of the bills apart from the last four of the so-called 40% invoices, the balancing invoice and the success fee.
On assessment, Master Rowley ruled that the 40% invoices were interim statute bills because the invoices “were not intended to be and could not have been final bills in respect of the work covered by them”. He also found that Rawlinson Butler had the right to deliver interim statute bills under the CFA.
Mr Justice Nicklin, sitting with Senior Costs Judge Gordon-Saker, said he did not agree that the CFA allowed for monthly statute bills.
It turned on the master’s reading of two clauses of the CFA. Clause 4.3 said: “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 said: “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…”
Nicklin J said: “In my judgment, clause 4.3 is neutral as to whether the 40% invoices were statute bills or not. The agreement to pay at the 40% rate is equally consistent with the appellant making payments on account at that rate. I am satisfied, however, clause 11.1 gives a clear indication that the 40% invoices submitted by the respondent were not statute bills.”
Given that the success fee could only by payable at the end of the case, “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”.
Two other clauses of the CFA – on what would happen in the event that the client respectively won or lost the claim – supported this conclusion, the judge said, as both referred to fees being payable upon the final result.
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.”
Nicklin J said his construction of the CFA was consistent with the principle that a statute bill cannot subsequently be amended, as it provided that the 40% invoices were liable to be changed later on. This did not mean solicitors could not be paid during the course of the retainer, but it would have to be in the form of payments on account under the express terms of the client-care letter.
Jamie Carpenter (instructed by Mayo Wynne Baxter) represented the appellant, and Robert Marven (instructed by DMH Stallard) the respondent.