Costs Judge Nagalingam has handed down another decision where a series of interim invoices raised to a client failed to comply with the strict requirements governing interim statute bills.
In Blue Manchester Ltd v Howard Kennedy LLP [2024] EWHC 2823 (SCCO), the claimant, which owned a building in Manchester used as a hotel by the Hilton Group, faced arbitration proceedings brought by Hilton.
In November 2020, after it had filed its response to the arbitration but before seeing Hilton’s evidence, Howard Kennedy provided a detailed costs estimate of nearly £910,000 and was then instructed.
The firm said it told Blue that, by around March 2021, the fees to date were in the region of £750,000 and that further fees of around £1.1m would be required to take the matter to conclusion.
Blue denied this but accepted that, by late spring/early summer 2021, the costs were escalating.
Due to escalating costs, the parties agreed a backdated CFA providing for discounted rates which equated to around 87.5% of Howard Kennedy’s normal fees, with the rest payable in the event the arbitration was successful but, ultimately, it was not.
The preliminary issue that had to be determined was whether the first 15 invoices qualified as interim statute bills and, if they did, whether there were special circumstances to order an assessment anyway given the time to challenge them had passed.
Judge Nagalingam accepted that the bills “bear all the hallmarks of a valid statute bill”, and it was also clear that the solicitors had made it clear in writing that they would be raising interim statute bills, something which often trips up many solicitors. However, the discounted arrangement threw a spanner in the works.
The Judge went on to say:
“However, that is not a clear right and, in my view, it falls to the defendant, in these circumstances, to be have been clear as to the true status of the bills being raised.
In my view, and when taken in combination with the fact that all of the bills in question were being paid at discounted rates (and so in the knowledge that further charges could be raised relating to the same work), it was incumbent on the defendant to be clearer both in their dealings with the claimant and the language of the relevant funding documents.
Thus, and contrary to the arguments put forward by [the firm], where clause 10 of the CFA talks of ‘an absolute right to assessment if you apply to the court within one month of delivery to you of the bill of costs’, the claimant was entitled to conclude this was a reference to a single bill of costs to be delivered upon conclusion of the proceedings.”
Howard Kennedy informed Blue that “unless otherwise stated, each of our bills has the status of a statute bill (but is not necessarily a final bill in the matter)” but the Judge stated:
“When one reads such a term, one can’t help but agree that it seems the defendant wanted the option to enforce payment one month after the request for payment, whilst openly expressing a right to raise further charges covering the same period and/or for the same work.” This meant the bills “lacked the necessary certainty to carry the status of being interim statute bills”.
The arrangement of the discounted CFA and the bills meant that the time for challenging them ran from one date in the event the arbitration was unsuccessful, but a later date in the event of success. The Judge said this could not meet the criteria of an interim statute bill.
“… how can it then be the client’s assessment rights are entirely contingent on the outcome of (in this case) the arbitration, such that there is in-built jeopardy in choosing when to challenge bills – bearing in mind that in a time sensitive deadline driven financially valuable case a client will naturally want their solicitors to be focused on their case, not a solicitor/client dispute.”
Absent an “explicit agreement to such an arrangement”, the bills were incapable of being interim statute bills, Judge Nagalingam concluded.
The Judge went on to criticise Howard Kennedy even more due to them dramatically altering an estimate without any justification.
In terms of solicitor client assessments, the Solicitors Act 1974 remains out of touch with modern litigation but nevertheless the stringent and tricky requirements must still be complied with if solicitors wish to raise interim and final statute bills.
