Solicitors “must be clear in retainer” about right to serve interim statute bills

It is “beholden” on a solicitor seeking to serve interim statute bills that the retainer makes it clear that such bills are final for the period, a master has ruled.

According to Mark Carlisle of Checkmylegalfees.com, which acted for the claimant in Erlam v Edmonds Marshall McMahon (EMM), Master Brown’s ruling means that “a term in a retainer for interim statute bills not only has to exist in the retainer, but it has to be sufficiently clear for a client to understand it”.

He said this “stricter approach” would allow more scope for clients to challenge their solicitors.

Andrew Erlam and three others brought an election petition to remove Lutfur Rahman as mayor of Tower Hamlets as a result of concerns regarding suspected vote rigging. Mr Rahman was found guilty of election offences and banned from public office. He was ordered to pay the petitioners’ costs, subject to assessment, and to make a payment on account of £250,000.

EMM was involved in recovering the costs, for which it charged the claimant £97,000 across 21 bills. Mr Erlam considered this excessive and sought a Solicitors Act assessment, but the law firm argued that he was out of time because several of the bills were interim statute bills.

Mr Erlam’s counsel, Erica Bedford, said they formed a Chamberlain bill in the context of a retainer that was an ‘entire agreement’. Further, the retainer did not make clear that the firm was entitled to serve interim statute bills, including conditional wording that said the client “may” have the right to challenge bills.

EMM’s counsel, Dr Mark Friston, submitted the parties actually entered into a general contract for services, meaning that a lack of any express reference to an entitlement to serve statute bills was not fatal to the solicitors’ ability to do so. It was necessary to infer, for the proper working of such a contract, that the solicitors could deliver interim statute bills, he said.

Master Brown said it was clear the retainer specified the work to be covered and was not a general contract for services: “I do not accept, however, simply because the retainer was extended to what may be referred to as ‘multiple matters’ that it therefore became a general contract of services.”

He went on: “It is not unusual, in my experience, for solicitors to be instructed on one particular dispute, but that this gives rise to other associated or ‘offshoot’ proceedings: it may not be necessary to extend the contract, or the retainer, to cover those matters.

“In any event, I do not think the mere fact that there were multiple matters, all essentially interrelated and associated with the appeal, realising assets in this case and resolving the costs matters gave rise to a general retainer for services.”

The judge also noted that, had there been a general retainer, he might have expected one bill in relation to a specific period, rather than multiple bills on the specific matters.

Master Brown considered whether, as Ms Bedford argued, he was bound by the High Court ruling in Vlamaki v Sookias and Sookias, and looked to last year’s decision of Senior Costs Judge Gordon-Saker in Iwuanyawu v Ratcliffes Solicitors which interpreted it, to determine whether the client needed to understand any term purportedly providing for an interim statute billing regime.

He found that the client did, even though he did not “underestimate” the point made by Dr Friston that, if there were such a principle, “it has, as he put it, lain undetected for a very considerable amount of time”.

The Vlamaki decision “rested on the importance of solicitors making it clear in the retainer that bills were to be final for the period covered”, he added.

Master Brown cited in particular Mr Justice Walker’s comments in Vlamaki that he interpreted the contractual retainer by reference to the agreement as a whole and by reference to the factual matrix at the time, and that in the event of any ambiguity, it would be interpreted against the law firm – the “factual matrix” here was that the client was not a lawyer.

The master noted that EMM partner Andrew Marshall “took it upon himself to explain to Mr Erlam matters relating to the finality of bills because, it may be inferred, he anticipated that Mr Erlam would not know about them himself”.

But the email Mr Marshall sent – after the client-care letter but before Mr Erlam signed the terms of business – was still not sufficiently clear whether the bills would be final or what criteria rendered them such.

“The email says ‘each bill can be a final bill’ and then refers to certain criteria, without setting out the criteria, which may, or may not, render a bill a final bill. I do not think the email conveys the information that would have sufficiently informed the claimant that the bills to be served by the defendants were final bills.”

The case was “on all fours with Vlamaki”, Master Brown concluded, because “the retainer was inadequate and not sufficiently clear in its terms to support a right to serve interim on account statute bills”.

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Costs News
Published date
10 Mar 2021

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