Coulson: Uneasy bedfellows
The Court of Appeal has upheld a decision that none of the 79 invoices worth nearly £13m received by a billionaire businessman over six years were statutory bills, meaning they remain open for challenge.
Lord Justice Coulson acknowledged, however, that solicitors seeking interim costs payments, while still wanting the protection of section 70 of the Solicitors Act 1974 – even with conditional fee agreements (CFAs) – “make uneasy bedfellows”.
Judge Leonard in the Senior Courts Costs Office held that there was nothing in the retainer of City firm Signature Litigation that authorised the delivery of interim statutory bills.
Bidzina Ivanishvili, from Georgia, is suing Credit Suisse for the alleged mismanagement of his assets, including the proven fraudulent activities of his former relationship manager, and losses claimed in the hundreds of millions of US dollars.
The litigation is highly complex, extending to multiple jurisdictions around the world, and Mr Ivanishvili instructed Signature in 2016 as global co-ordinating counsel. Between 31 March 2016 and 26 October 2022, the firm rendered 79 monthly invoices totalling £12.8m. All have been paid.
The part 8 application sought to preserve Mr Ivanishvili’s rights to challenge the bills through a section 70 assessment.
His primary case was that none of the invoices qualified as statutory bills because the retainer incorporated a discounted CFA of 65% of Signature’s standard fees, and the invoices represented only a part of the fees that may become due – in the event of success, the rest of the firm’s standard fees, as well as an uplift fee and a success fee, were payable. As a result, they were neither complete nor final.
As a result, he argued, the 28 days to make an application for assessment would not start to run until a final bill was delivered, rather than after each one.
Judge Leonard agreed but gave permission to appeal, with Coulson LJ – giving the unanimous ruling of the court – observing that there was no Court of Appeal authority directly on the point.
Coulson LJ said the work that was the subject of both the discounted fee and the standard fee was “exactly the same”; Signature was just giving its client a temporary discount of 35%.
“That discount might be permanent but, if the necessary contingency was achieved, it would only be temporary. At the time that the invoice was rendered, nobody knew whether or not the additional 35% would ever be payable…
“Prima facie, therefore, the interim invoices in this case, based on the discounted fee, were neither final nor complete… The lack of finality or completeness strongly suggests that the invoices were not interim statutory bills.”
This conclusion was supported by the statutory definition of a CFA, which “explains that the conditional element of the fees are a part of the fees for the work that the solicitor has carried out”, and also by three High Court authorities.
Coulson LJ noted how it was “common in costs cases for the appellant to argue that, if the decision at first instance is not overturned, it will have a devasting effect on costs practice and funding. This case was no exception”.
For Signature, Ben Williams KC said his clients faced the possibility of bills going back to 2016 being the subject of detailed challenge. He also said it could have a chilling effect on the use of CFAs more widely.
The judge responded: “As to the point about the risk of a potentially stale challenge to the bills, that is a risk that any solicitor runs if his bills are not interim statute bills.
“In any event, it does not seem to me that, even if the respondent’s challenge went back to 2016, that should present any sort of insurmountable difficulty for the appellant.
“These days, with full computer records, a well-run firm of solicitors should have no difficulty in being able to justify the charges that it made in its detailed invoices, even if those invoices are some years old.”
There was “no evidence” on the wider implications before the court, with Coulson LJ noting that no representations had been received from organisations like the Law Society that often sought to intervene in costs cases.
“Moreover, given that, as I have demonstrated, the three CFA cases have each rejected the solicitor’s claim that the bill in question was an interim statutory bill, a further decision to the same effect should not come as a surprise to those solicitors undertaking work on this basis.”
He also rejected Mr Williams’ suggestion that this area of law had become “blinded by its own specialism”, and that highly technical arguments were blurring the straightforward resolution of these issues.
“In my view, that submission neatly avoided the reality of what was happening here. In an ordinary case, a consumer of services may have up to six years to pursue claims against the services provider.
“But in the case of solicitors, s.70 drastically truncates that right: it offers a highly technical form of protection to solicitors by limiting the period of challenge to one year after the bill has been paid.
“That was not a problem in the past, because solicitors’ bills were usually rendered at the end of their work. Now solicitors sensibly seek interim payments, but they still want the protection of s.70, even under CFAs. As the authorities demonstrate, they make uneasy bedfellows.”
The Association of Costs Lawyers recently called for the Solicitors Act to be updated to avoid preliminary arguments over whether a bill is actually a bill – or a request for payment on account – before any debate could be had on its contents.
Only a month ago, another costs judge rejected national firm Weightmans’ argument that its retainer gave it an express right to raise interim statute bills.
Excellent article.I look forward to many more.