Menzies V Oakwood Solicitors – Protecting Solicitors from old Clients bringing claims for their Deductions - Chronicle Law

This case was reported on by Katie Bell of Oakwood Solicitors in two separate articles in July 2023 and October 2024, Chronicle Law have put both articles together to provide the reader with good context of the case and the final outcome – we felt this was a particularly good case to share with our audience as it is a point of law that could affect many of you. Also some of the team at Chronicle Law remember the chaos that ensued with waiting for the Jackson decision, which Katie mentions, much of our work then for another company was very much in the air so this felt a little nostalgic to us as well. We thank Oakwood Solicitors for continuing to share their commentary of cases they have had in court, though the outcome of this case did not rule in their favour it is certainly an interesting read.

Katie Bell writes:

I’m sure since Jackson came along in 2013 and turned the world of Personal Injury upside down, many Firms have encountered some form of previous Clients trying to bring claims against the Firm to recover the Damages deductions taken.

I know for us here at Oakwood Solicitors, we have seen the same and spent a lot of time changing and adapting our processes to protect the Firm from these Solicitor Act Assessment claims being brought from previous clients after the expiry of the 12 month period of limitation within the Act.

The final decision on Menzies V Oakwood was handed down on 23^rd October 2024 in the Supreme Court.

Unfortunately, in this case, Oakwood Solicitors Ltd lost and Mr. Menzies was granted his Appeal. This was a difficult decision to accept, but we have been proactive since it was received.

Speaking about the case, Katie Bell, Director, Solicitor Advocate (Civil) & Head of Costs at Oakwood Solicitors Ltd, said:

“To say we are disappointed with the final outcome of the Limitation Preliminary point would be an understatement, but it’s just another bump in the road on these types of cases.

“We are in a culture now where unfortunately this is the norm these days and these types of claims will keep coming through your doors. Following the steps above should protect any future work and ensure the 12 month limitation starts to run.

“I could say I don’t find the Judgment practicable or relevant in the current century, where we have different retainers and agreements with clients, but this won’t change where we are. Change your policies and protect your Firms is the best advice to give.”

Below we break down the circumstance of this case, and what Firms should implement to ensure they are protected.

The circumstances of the case explained

Mr. Menzies was a former client of Oakwood Solicitors Ltd where we acted for him on an RTA case. Following the successful outcome of his case, we deducted a percentage of his Damages to cover our shortfall in costs, as outlined in our Retainer.

Mr. Menzies was given a detailed Retainer at the outset of the claim with all information in about the deduction and the Solicitor Act Assessment process of challenging his Solicitors fees. He was then given a Statute Bill at the end of his case that explained all the costs of his claim, the amount recovered from the Defendant and the shortfall in the Firms costs.

Due to the level of damages Mr. Menzies successfully recovered from the work of Oakwood’s Fee Earners, his 25% cap of Damages was a high Sum. The full amount was not taken from Mr. Menzies, as the shortfall in costs was less than 25% of his damages, so Oakwood took the shortfall amount as per the Retainer with Mr. Menzies.

Menzies and sent the remaining amount of the deduction to Mr. Menzies.

Solicitors Act Assessment pursued

Some 20 months after the case was concluded, Mr. Menzies instructed the Firm of JG Solicitors to pursue a Solicitor Act Assessment for him to challenge the amount of fees he paid Oakwood as a deduction from his Damages.

Oakwood Solicitors Ltd deemed Mr. Menzies was Statute Barred in bringing his case, as it had been 12 months since payment of the Bill had taken place. Oakwood Solicitors Ltd disputed the Solicitor Act Assessment Claim brought by Mr. Menzies on the basis the same was outside of limitation.

Since then, Oakwood Solicitors Ltd has had four Hearings all on Limitation.

First Hearing – SCCO

At the First Hearing before Cost Judge Rowley, he agreed that Mr. Menzies had brought the claim out of time and asserted he was Statute Barred by section 70(4) of the Solicitor Act 1974.

JG Solicitors appealed this decision and the same went before Mr. Justice Bourne in November 2022.

“On the facts of this case, I therefore conclude that the Respondent did not inform the Appellant with sufficient clarity that he could object to the deduction with a reasonable time, failing which it would be taken to be agreed subject to his statutory assessment rights.

“In those circumstances I have concluded that payment was not effected by a settlement of account. The appeal will therefore be allowed.”

Now this Judgment did not sit well with Oakwood. The interpretation of the Act by Justice Bourne was not correct in our opinion, and we sought permission to the Court of Appeal on the decision.

Second Hearing – High Court

Justice Bourne granted the Appeal and asserted payment was not affected by a settlement of account. In essence, he asserted the Client had not made payment for the 12-month time limit to start to run under the Act as he asserted Oakwood had not obtained agreement specifically from Mr. Menzies for the Deduction in order to demonstrate that the account was settled. He said:

“In those circumstances I have concluded that payment was not effected by a settlement of account. The appeal will therefore be allowed.”

Now this Judgment did not sit well with Oakwood. The interpretation of the Act by Justice Bourne was not correct in our opinion, and we sought permission to the Court of Appeal on the decision.

Third Hearing – Court of Appeal

We went before the Court of Appeal on the 5^th July 2023. Oakwood had instructed Craig Ralph and Erica Beford of King’s Chambers to advise and advocate on this matter. Both are very knowledgeable in these types of claims and have provided a great service in handling the claim brought against our Firm.

The question before the Court of Appeal was what amounts to payment of the Bill in accordance with section 70(4) of the Solicitor Act 1974. Sir Geoffrey Vos, Master of the Rolls, Lord Justice Lewison and Lady Justice Smiler were presiding over the case.

If payment in this case has taken place, then the claim by Mr. Menzies has been brought out of time. The facts and interpretation of the claim all revolved around what was payment, when did it take place and when did the 12 month limitation period start to run. In making their decisions the Judges referred to:

The Retainer between Mr. Menzies and Oakwood Solicitors
The accompanying Client Care Documents sent with the Retainer including the Terms of Business
The correspondents sent to Mr. Menzies at the time of acceptance of the Damages offer
The Correspondents and Bills sent to Mr. Menzies during the cost negotiation of the claim and the final bill of the matter.

The Appeal was successful and Mr. Menzies was found to be Statute Barred from bringing his claim. The following paragraphs are taken from the Judgment at the Court of Appeal:

The only questions in this appeal concern, as we have said, what is required by section 70(4) to constitute “payment” and whether those requirements have been satisfied. In our judgment, the use of the phrase “settlement of the accounts” should no longer be used in this context. It is not a phrase that is used in section 70.

Its meaning is unclear, and its origin lies in cases in which there was no written contract of retainer. Nowadays, solicitors and clients normally enter into a written contract of retainer, and in some cases they are legally required to do so.

The phrase used in the statute is “payment of the bill”. We agree with the view expressed in Hemming that the action of payment of a solicitor’s bill ought to be no different to the action of payment of any other bill. We are content to adopt the meaning proposed by Aldous LJ in Gough, namely that payment for the purposes of section 70 is a transfer of money (or its equivalent) in satisfaction of a bill with the knowledge and consent of the payer.

In order for a transfer of money to be in satisfaction of a bill, there must be a bill to be satisfied. A “bill” in this context means a bill that complies with the requirements of section 69. The delivery of a compliant bill will give the client the necessary knowledge.

The requirement of consent does not, in our view, require that consent be given after the delivery of the bill, if the client has already validly authorised the solicitor to recoup his fees by deduction from funds in his hands.

What the client needs to consent to, in order for payment to take place, is “the transfer of money”, not necessarily the precise amount to be transferred. We reject the submission that the client must agree to a deduction quantified in pounds and pence. It is the process of assessment that fixes the precise amount that the client is required to pay.

The statute itself lays down the timetable, which is triggered by the delivery of a compliant bill. It is wrong in principle for judge-made law to qualify that timetable by the introduction of such indeterminate concepts as “a reasonable time” after delivery of a compliant bill. Either payment has taken place, or it has not.

It must not be forgotten that, even if money has been transferred with the consent or authority of the client, the client still has the right to challenge the precise amount through the medium of section 70, subject to the time limits laid down in the statutory timetable. That right exists whether or not the client has agreed the precise amount, whether before or after the transfer.

Whether the client has authorised the solicitor to recoup fees by way of a deduction from funds in hand is a question of interpretation of the written contract of retainer. In our judgment it is clear that the CFA in this case, and its accompanying documents, specifically authorised the Solicitors to recoup their fees out of the Client’s compensation, up to a maximum of 25% of that compensation. Payment of the bill took place when, after delivery of the bill, the Solicitors made that deduction. It follows, in our view, that payment of the bill took place more than one year before the bill was challenged and that, consequently, the court’s power of assessment was barred by section 70(4).

This was a great result for Solicitor Firms at the time but JG Solicitors sought appeal to the Supreme Court.

Fourth Hearing Supreme Court Proceedings

JG Solicitors made an Application to Appeal the Court of Appeal’s decision on three grounds. Only one was successful – The Court of Appeal was wrong in law to find that the term “payment” in Section 70(4) of the Solicitor Act 1974 does not require a “settlement of Account”.

The Supreme Court Justices determined that payment required some form of agreement by the Client to the Bill presented.

The Supreme Court agreed there was a valid retainer in place that assessed a mathematical sum owed by the client as a cap, they agreed bills had been sent to the client at the conclusion of the case and payment of the same had been taken from the deduction on client account.

They however asserted it could not be payment in terms of the Solicitor Act as no agreement from the client had been received before payment took place.

What does this mean for Firms?

In essence regardless of your retainer with the client, your explanation to the client at the end of the claim, your authorities with the client agreeing Damages with a section showing the deduction cap being taken, the presenting of the client with a Bill and the client not responding or challenging the costs taken from Damages, does not satisfy payment in terms of section 70(4) of the Act.

Mr. Menzies had full details throughout his claim of what he would be charged. He even asserted he was surprised to receive some of the deduction back as he had thought the full amount would be taken for conducting his case.

None of the above is sufficient. You must get from the client a signed authority at the conclusion of the case once costs are agreed and the Final Statute Bill presented to the Client, to constitute payment for limitation to start to run under the Act.

How to protect Firms going forward?

So how do we protect our Firms going forward? If you have a standard CFA with deduction then do the following:

Ensure you have a detailed Retainer and accompanying letters to the Client at the onset explaining the deduction to be taken from Damages and the Client’s right to have these assessed. This should be plain English and easy to understand by the client. This was not helpful for the payment argument in Menzies, but you must still ensure the retainer is sound.
Ensure you send detail letters and authorities to the client at the point of accepting the Damages offer explaining the amount of deduction you will be taking from the Client’s Damages and ensure they send written confirmation accepting the offer with the deduction been taken.
If a deduction is been taken from damages leave this on your client account until agreement is received from the client.

Following Menzies you must:

When costs are agreed send out a detailed letter, a compliant section 69 Final Statute Bill and form of authority to the client to agree the amount held from damages as a deduction can now be used to pay the Solicitors outstanding costs as payment of the Bill presented.
Give the client their options to raise a Solicitor Act assessment in one month if they wish to challenge the Bill.
If the client returns the authority you can bill the deduction in payment of the Bill.
The client can still raise a Solicitor Act assessment in 12 months if they prove special circumstances, but the 12 month limitation period will start to run.
If they do not return the authority and one month lapse without the client commencing a Solicitor Act Assessment then you as the Solicitor will have to commence the assessment to be able to recover the costs of the Bill.

The notion from the Supreme Court that Solicitors can commence their own assessment after the one month period and recover their costs of doing the same will inevitably backlog the High Courts and Judiciary and result in Solicitors being owed more costs that will be difficult to recover.

It is important to remember Menzies is a limitation point. Yes, Firms will probably be in a situation now where old clients have a right to assessment, but this does not mean they will be successful.

Remind former clients of Belsner and referring their case to the Legal Ombudsmen, being the most appropriate forum for their complaint on fees charged.

The Solicitor Act gives client’s the right to challenge our Bills. Make sure you have the correct processes in place to protect your Firms and fight these claims when they are presented.

Menzies V Oakwood Solicitors – Protecting Solicitors from old Clients bringing claims for their Deductions