INVOICING THE CLIENT – MORE RETAINER PROBLEMS LAID BARE
In a previous blog we dealt with some issues which arise if the retainer between a Solicitor and Client has not been well thought through. We now have another case where such a retainer has been subjected to close scrutiny by the Court, this time in relation to whether invoices rendered to the client were effectively requests for payment on account or, alternatively, self-contained (“statute”) bills which were capable of being sued upon. The lesson to be learned? If you want to be able to send a statute bill – say so, very clearly, in the retainer document.
In these days, a Solicitor who does not carefully think about funding and cash flow will probably be characterised as being either too rich or too lazy. For the vast majority of practitioners, ensuring that a client fully understands the invoicing regime is crucial not only in terms of the financial aspects, but also to ensure that there are no surprises and that the client is kept happy.
Perhaps the best way to start here therefore is to consider the fairly brief summary of the relevant law set out in Bari v Rosen  EWHC 1782 (QB):
13 … Where a solicitor issues to his client a bill of costs which complies with the requirements of the Solicitors Act 1974 it is known colloquially as a “statute bill”. Section 70(1) of the Act gives the client the right, within one month of delivery of the bill, to apply to the High Court for the bill to be assessed, without requiring any sum to be paid into court. If no such application is made, the absolute right to assessment is lost. However, if a statute bill has not been paid and the client applies to the High Court for assessment of the bill within twelve months from delivery of the bill, the combined effect of s 70(2) and (3) is that the High Court may allow assessment (and I am advised by my assessors usually does allow assessment), on such terms as the court thinks fit. If the bill remains unpaid and twelve months have expired from delivery of the bill, the court may only order an assessment if special circumstances are shown.
14 The position after a statute bill has been paid is somewhat different. The client still has the absolute right to an assessment before the expiry of one month from delivery of the bill. After that, but only up to twelve months from the date of payment, if the client applies for assessment, special circumstances need to be shown. No assessment at all can be ordered after the expiration of twelve months from payment. Section 70(4) creates an absolute bar. For completeness I should mention that there are additional provisions where the solicitor has obtained judgment on the bill, but this does not arise in the present case.
All of this was relevant in the case of Vlamaki v Sookias & Sookias  EWHC 3334 (QB), where the High Court was dealing with an appeal from Master Campbell in the SCCO in a matter where the Claimant sought leave to have assessment of her Solicitors’ costs. At the heart of the case was whether various invoices rendered to the client whilst matters were continuing should be treated as final bills for the work done in the periods to which they related – and thus the clock would be ticking for the various time limits in section 70 set out above.
The High Court rehearsed the argument that in general, a retainer between a Solicitor and client is an “entire contract” and the Solicitors can only claim remuneration when either all of the work is completed or there has been a natural break in the matter. However, this is subject to any express agreement to the contrary and it is perfectly in order for Solicitors to seek to agree a different provision. Thus, the general rule will be that invoices rendered during the course of a matter will be treated as requests for payment on account rather than final, or what are commonly called “statute bills”. It is permissible for a Solicitor to transfer money from client account to office account when money has been paid in by the client even if that is not pursuant to a statute bill, provided that the amount so transferred does not exceed the work actually done.
The main benefit of treating such invoices as no more than payments on account is that it is open to the Solicitor to adjust the charges at the conclusion of the matter (upwards or downwards) in order to reflect the particular circumstances of the case. Most Solicitors will be aware of the so-called “7 pillars of wisdom” which are directly relevant to Solicitors’ charges and which may mean (again depending upon what is actually in the retainer) that until the matter has been concluded the appropriate amount to be charged cannot be properly known. On the other hand, a statute bill cannot be adjusted later, but if it is not paid, then the Solicitor will be able to sue upon it without waiting until the end of the matter.
In this case, Master Campbell had found that the retainer did not contractually entitle the Solicitors to render Statute bills during the currency of each matter. After a close analysis of the wording of the retainer, the High Court agreed with the Master. In interpreting the retainer, the Court proceeded on the basis of the fundamental principles that where there was ambiguity, this would be construed against the Solicitors and that the client here was not a lawyer and therefore could not be assumed to know the provisions of the Solicitors Act (or indeed the law generally).
The Court took account of the provisions in the retainer which suggested that interest could be charged upon these invoices if they were not paid and that the Solicitors could insist upon their payment, but found that to a layperson, they would not understand the wording to represent the right to deliver statute bills.
In construing the retainer against the Solicitors, the Court found that it was not in the client’s interest for these invoices to be treated as statute bills and approved the consideration of Master Leonard at first instance in Bari in which he said:
“The potential difficulties and expense faced by a client who can only challenge regular bills by instituting multiple assessment proceedings – against the same solicitor who is actively handling a number of current matters … – are obvious. Further, the choice is between a right which begins to diminish after one month from the first regular bill and a right which does not begin to diminish until a later and, for the client, obviously more practicable time.”
The most fundamental point which the Court made here was that the retainer lacked an express statement that each interim invoice would be a final (statute) bill. It is clear from the Judgement that if Solicitors want interim invoices to be treated as statute bills then they had best set that out explicitly and extremely clearly in their retainer documentation.
So far so good for the Claimant.
However, there was a very neat argument from the Defendants which rather left the Claimant being “hoist by her own petard”. The Defendant said that if the Court was against them on their contention that the invoices should be treated as statute bills, then it must surely follow that there had been no statute bills delivered and therefore the Claimant’s application for a Solicitors Act Assessment must be premature.
After considering the construction of a letter written by the Defendants upon termination of their retainer, the Court found that this letter could not convert what had previously been no more than requests for payment on account into Statute bills. At first instance, Mastic Campbell had found that this letter had the effect of bringing the series of bills to a head and that the final invoice should be treated as a statute bill to incorporate all of the previous invoices done. The High Court disagreed and therefore the Claimant was left in a position where the application for assessment of the invoices could not proceed because no final or statute bill had ever been delivered.