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“Costs lawyers delivering results” ISSUE: 18 | JULY 2012


SOLICITORS ACT ASSESSMENTS: NO HOLDS BARRED Historians will tell you that the most vicious and merciless wars are civil wars; senior politicians will tell you that, while they might have some fear for those on the opposite benches, it is the ones behind you (who are supposed to be on your side) that you fear far more. And so it is when a Solicitor and Client fall out with each other. Those of us who practice in the field of costs well know that this often results in protracted litigation in the Senior Courts Costs Office, involving extensive cross-examination of both parties, the upsetting revealing of apparent confidences and allegations of lying and skulduggery on a scale which makes the worst “between the parties” assessment seem like a Buckingham Palace garden party. And soon the costs of the assessment often outstrip the costs which were being argued about in the first place. The battle lines in Solicitors Act assessments are often stark and suspicion with the process goes deep: clients will tell you that the assessment process is one where lawyers simply look after their own while fleecing ordinary members of the public; Solicitors will tell you that the panoply of rules make it impossible for them to do their job properly and run a successful business. This divide is only likely to deepen with the forthcoming Jackson reforms: as fewer costs can be recovered between the parties, there will inevitably be substantially increased pressure on the Solicitor and Client relationship where a Client is seeking to reduce any shortfall payable by them. In recent years, many of the Solicitors Act battles have concerned Solicitors exceeding their own estimates of costs and the right of the Solicitors to end the retainer where the client does not pay and/or where the client wishes to run what the Solicitors consider are improper or hopeless points. In general, the lesson from the recent decisions is that the lower courts have tended to favour the client on many of these points, but when appealed the higher courts (i.e. High Court Judges and particularly the Court of Appeal) have tended to favour the Solicitors. This article reviews the most important recent decisions on these subjects.


A useful starting point is the two very lengthy decisions of Morgan J Mastercigars Ltd Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch) and [2009] EWHC 651 (Ch). Cutting a very long story short, the Judge held that, where the Solicitor had given an estimate of future costs which had been exceeded substantially without prior warning to the Client, the previous standard approach adopted following Wong v Vizards (No.2) [1997] Costs LR 46 of allowing no more than the estimate together with something like a 15% margin on top (and here the Costs Judge had added 20%) was arbitrary and wrong. He held that the Solicitors Code of Conduct was not incorporated by necessary implication into the retainer and that, while an estimate may provide a useful yardstick to measure the costs on assessment, if there is a good explanation for the difference between the estimate and the actual costs, the estimate is a less useful yardstick.

The battle lines in Solicitors Act assessments are often stark and suspicion with the process goes deep… In assessing costs in such circumstances, the Costs Judge has to answer the question of what it is reasonable for the Client to pay, having regard to the estimate and any other relevant matter. In doing so, the Court has to consider whether and to what extent the Client relied on the estimate and, if so, whether and to what extent there should be a reduction in the costs in order to do justice between the parties, bearing in mind that it is no part of the Court’s process simply to punish a Solicitor for getting an estimate wrong. It is important to recognise that the Court of Appeal refused permission to appeal from Morgan J’s second decision in a reasoned judgment: see [2009] EWCA Civ 1526. The issue of estimates is thrown into sharp relief in the following, and not unusual, circumstances. An estimate provided by the Solicitor is exceeded without warning to the Client, the Client therefore

03 | KAIN KNIGHT INBRIEF refuses to pay the bill, the Solicitor downs tool and the retainer comes to an end. In such circumstances, is the Solicitor entitled to be paid anything at all? In a Court of Appeal decision hot off the presses, Minkin v Cawdery Kaye, Fireman & Taylor [2012] EWCA Civ 546 (1st May 2012) both the Costs Judge and the High Court Judge had held that the Solicitors had wrongly terminated the retainer and was entitled to be paid nothing at all for the work they had done. There the Solicitors had given an estimate of £3,500.00 plus VAT to a respondent husband in a non-molestation/ouster application by the wife. In fact, after the estimate was given, it turned out just before the hearing that the wife was no longer in occupation of the matrimonial home, having rented it out under a tenancy agreement. This complicated the proceedings unexpectedly but the Solicitors had failed to warn the Client the estimate was inadequate. They simply served a bill after the hearing for the unfinished proceedings of £5,500.00. As a result, the relationship between Solicitor and Client broke down, with the Solicitor threatening to down tools until put in funds for the next hearing, and the Client relying on the estimate in refusing to pay anything more. Master O’Hare and Cranston J had held that the fact the estimate had been exceeded was a good reason for the Client not to pay the bill and thus the Solicitors had wrongly terminated the retainer. As it was an “entire retainer” (i.e. the Solicitors were obliged to keep acting in the litigation until its end), they were therefore entitled to be paid nothing. The Court of Appeal disagreed: the estimate was a guide only and was not a guarantee as there were many factors outside the Solicitors’ control which might affect the level of costs. The Client was not entitled to refuse to pay. He should have paid and, if so minded, either complained to the firm and/or sought a detailed assessment under the Solicitors Act. In these circumstances, Solicitors cannot be compelled to continue working for Clients where there was little realistic prospect of payment by their Client. The correct interpretation of the facts was that the Solicitors had suspended the retainer pending receipt of further funds, they had not been forthcoming and the Client had then terminated the retainer. The Solicitors were therefore entitled to be paid a reasonable amount for the work they had done, presumably on the principles in Mastercigars. The higher courts’ more sympathetic approach to the perceived plight of Solicitors in dispute with their Client was also reflected in the Court of Appeal’s decision in Buxton v Mills-Owen [2010] EWCA Civ 122. Similarly to Minkin, Master O’Hare had there found that the Solicitors wrongly terminated their retainer and, as the retainer was “entire” for the purposes of litigation, they were accordingly entitled to nothing at all for the work they had done. Mackay J upheld Master O’Hare’s decision, but the Court of Appeal reversed it. In this case, the Solicitors had assisted the Client in an appeal, but had refused to

put forward some of the grounds he wanted on the basis that the points were not properly arguable. Eventually, when the Client refused to take their advice, they had terminated the retainer. The lower courts held that the Solicitors should simply have advised the Client that the points were doomed to failure and, if the Client refused to take the advice to remove them, they should have put the points forward anyway, as long as there was nothing improper in them. They had no “good reason” for termination. The Court of Appeal disagreed. They held that both Solicitors and Counsel were under a duty not to include in court documents any contention which they did not regard as properly arguable and therefore they had good reason for terminating the retainer and were entitled to be paid a reasonable amount up to the date of termination. The position on points such as these is clearly more complex than some had thought. There is no easy answer on estimates but it is plain that the higher courts at least will no longer simply punish a Solicitor for providing a poor estimate. Further, Clients will find it much more difficult than some had thought in seeking to reduce their Solicitors’ costs to nothing where the retainer has come to an end during litigation. But as the Courts have emphasised in these decisions, they are highly fact sensitive, so we can confidently expect an increase in these kinds of disputes once the new Jackson regime arrives.




COURT OF PROTECTION /DEPUTYSHIP BILLS OF COSTS The Court of Protection exists to manage and control the estates of those incapable of managing their own financial affairs, whether it is by age or medical condition. The Mental Capacity Act provides the framework to any application to the Court of Protection for the making of an Order to appoint a “Deputy” to oversee the running of the “Protected Person’s” financial affairs.

The preparation of a Bill of Costs and its standard basis assessment follows the relevant Parts (43.44 and 47) of the Civil Procedure Rules. If the assessable costs exceed £3,000.00 then a detailed Bill of Costs is prepared and forwarded to the Court with the supporting documents and Court fee. If the assessable costs are less than £3,000.00 then a Short Form Bill is prepared which provides more of a summary of costs incurred. Again this will be assessed by the Court and a lesser fee is payable.

The Mental capacity Act makes it clear who can take decisions in various situations however, that person (Professional Deputy, Lay-Deputy), must comply with the Mental Capacity Act when making decisions or acting for the Protected Person.

Practice Directions are in place to support the Court of Protection Rules (2007) and Practice Direction B relates to fixed costs that can be taken in certain areas relating to the Protected Person’s finances, for example the application to appoint a Deputy or the preparation of Tax Returns or the preparation of the Annual Accounts. Fixed costs are optional though and the Deputy can request that the costs be assessed along with the day-to-day work which is referred to as the General Management.

The Mental Capacity Act ensures that those who are empowered to act on behalf of the Protected Person do so with the Protected Person’s best interest in mind. A testamentary capacity assessment will be undertaken by the potential Protected Person’s GP or other expert to determine as to whether the individual has capacity to make his or her own decisions about their finances. If the Protected Person is proven not to y within maximum costs recover have capacity a Deputy will be appointed. The Deputy s e m i minimal recovery t is appointed by the Court of Protection to manage the financial affairs of someone who has lost capacity and does not have a Lasting Power of Attorney. As well as a Financial Deputy, a Health and Welfare Deputy can be appointed if there are concerns as to the Protected Person’s welfare. It is the duty of the Deputy to protect the Protected The appointment of a Deputy is a judicial one and the Person’s financial position and at Detailed Assessment Court will appoint the person it most thinks is in the the Court is keen to encourage the allocation of work Protected Person’s best interest. This could be a family to appropriate levels of fee earner. It is also the case member in certain circumstances but it is usually a that the guideline hourly rates are usually recoverable Solicitor. The Court of Protection also has a list of (depending on any agreement reached), but very rarely approved Deputies (Panel Deputies) should there be no are uplifts allowed in such matters. one closer to the Protected Person willing to act. In order to reduce costs, various decisions have been The day-to-day administration of the Court of Protection is carried out by the Office of the Public Guardian, an agency that supervises up to and after their appointment. The Office of the Public Guardian also has a responsibility for mental capacity policy and provides guidance to public, legal and health professionals. There are four levels of supervision; close supervision (Type 1) for complex cases (for example a disagreement or investigation of Deputy); intermediate supervision (Type 2A) which would be appropriate for new Lay-Deputies who may need support (especially in their first year); light supervision (Type 2) which is where the case is straightforward and finally minimal supervision (Type 3) where the assets are less than £18,000.00.

made over the years. In the matter of Leighanne Radcliffe (Master O’Hare – 2004), it was determined that any letters enclosing cheques for the payment of invoices or supply of funds should be charged at 1/20th of the hourly rate. This policy has also been applied in recent assessments to any payments being made by BACS or CHAPS.

The Radcliffe approved judgment also suggested that it would be inappropriate for a claim to be made for inter-office correspondence and discussions. This, in main, relates to the allocation of work, however, we regularly liaise with the SCCO to discuss decisions being made to ascertain current positions. It is clearly the responsibility of the Deputy to ensure that the

05 | KAIN KNIGHT INBRIEF Protected Person’s best interests are being met and so there has to be discussions of a Deputyship nature between the Deputy and the lower grade of fee earner who has the day to day conduct of the file. In order to attempt to recover these costs as reasonable, recent Bills have been sent for Assessment to the Court with additional information about the running of the matter. An update will be provided in the future as to whether these costs have been successfully recovered. Upon Assessment, Bills have also been reduced where the Bill includes costs relating to a Personal Injury claim if the Deputy was appointed for medical reasons. The Personal Injury Solicitors need to provide details of damages to the paying party in the Personal Injury claim which would include current and future costs relating to the Protected Person’s ongoing and future care and the costs of the Deputy in overseeing the finances. It is therefore being experienced at Assessment that any time spent by the Deputy in collating the financial data should be included with the Personal Injury damages claim and not charged to the

estate of the Protected Person. Again an update will be provided as we are experiencing different decisions depending on who at the SCCO has assessed the bill. As with other areas of litigation, cost issues continue to be raised in respect of Deputyship Bills prepared and we continue to maintain a close eye on developments to ensure we strive to maintain high cost recoveries at Detailed Assessment.



COSTS IN THE COURT OF PROTECTION Back in the middle ages the Courts were asked to deal with the affairs of individuals who were known the as “lunatics and idiots”. The person who had to make decisions on behalf of these unfortunate people was the Master of Lunacy who worked in the department responsible for their welfare which was known as the Lunacy Office until 1934. If it was not so serious it could easily be the plot line for a Monty Python sketch but unfortunately it is serious, in fact very serious.


The powers that be realised that it was not a user friendly term and it was originally re-named the Management and Administration Department until some one pointed out that the acronym again was not appropriate.

Where a professional is dealing with the affairs of an individual under an Order of the Court, and the assets of the individual are less than £16,000, then the professional may take a general management fee of 2.5% of the Patient’s assets on the anniversary of the Order, appointing the professional to act (plus VAT). The Senior Courts Costs Office determines what they consider to be reasonable costs taking into consideration the general principles of costs such as proportionality and specific guidelines such as the letter rate for payment of supplies. The way to increase revenue is to foresee the challenges that the Costs Office will raise and draw the bills accordingly.

More and more Solicitors are rejecting the fixed fees The title the Court of Protection was adopted in 1947 and pushing for assessment. In fact according to the although the term “lunacy” continued in general use Senior Courts Costs Office’s records there has been until the sixties when finally it was outlawed. almost a 20% increase in bills being assessed by the Courts. In 2006 there were 4,082 bills assessed as The Court of Protection as we know it today was established under the Mental Capacity Act (2005) and opposed to 4,960 in 2010 and we suspect that this started to operate in 2007 having jurisdiction over the figure will continue to increase. property, welfare and financial care of individuals that have been determined by the said Court to lack mental capacity. The costs to solicitors acting as professional deputies for property and affairs were amended in February 2011.

We are pleased to say that we have helped numerous firms in increasing revenue. Many Costs Lawyers advertise expertise in dealing with these types of matters but only a handful of Costs Lawyers actually specialise in this marketplace. We, at Kain Knight have a whole department dealing specifically with Court of Protection matters from small to big ticket.





Now the Legal Aid Sentencing and Punishment of Offenders (LASPO) Act has received royal assent we potentially face an increase in the number of Lippies. But what on earth is a Lippie? A Lippie is someone who is affectionately known as a Litigant in Person. Also known as an LIP and often referred to by solicitors as trouble. The Litigant’s in Persons Costs and Expenses Act 1975 came into force in April 1976 and basically permitted a successful Litigant in Person to be able to recover Costs from another Party if they have been successful. Under CPR 48.6 costs must not exceed, except in the case of a disbursement, two thirds of the amount which would have been allowed if the LIP had been represented by a Legal Representative. A LIP includes such entities as a company or other corporation, a barrister, a solicitor, a solicitor’s employee but a solicitor who, instead of acting for himself, is represented by his firm is not. A LIP can recover the princely sum of £9.25 per hour. It is this low because the Courts expect and accept that a LIP will spend far more time on a case than a professional. In addition, a LIP can instructed a professional i.e. a solicitor or barrister to advise or assist and can recover those costs in full.

If, however, they can show that they have suffered financial loss they can make a greater recovery limited to two thirds of the amount which would have been allowed if the LIP had been represented by Solicitors. In addition, CPR 48.6(4) (a) the amount that they can recover is limited to the financial loss. In R v Legal Services Commission (2002) EWCA Civ 250 3 Costs LR 341 the successful LIP produced a rough schedule of his timing showing that he had spent 1200 hours. The Courts first had to consider what a reasonable Solicitor would have spent and allow two thirds of the said amount. The Courts accepted that on a rough and ready basis a Solicitor would have spent £15,000.00 and thus allowed the LIP £10,000.00.



Q &


07 | KAIN KNIGHT INBRIEF My Client has not paid my Bill, what should I do?

What is the correct form and content of a Solicitor and Client Bill?

The answer is quite simple. Sue!

The Solicitors Act 1974 gives no clear guideline for the format of the Bill other than it should give the Client sufficient information for them to decide the fairness of the charges - ”To professional services“ is not sufficient. You do not have to show hours spent and rates, a narrative setting out what you have done and the period it covers is usually sufficient. However, a Client may request full details. Attaching your computer records is not often a good move. Clients may not understand how Solicitors record time and this can lead to unnecessary disputes.

But before you do so there are certain fences you have to jump. 1. Ask yourself, have you delivered a proper final Bill, i.e. one that is not an interim request for a payment on account. 2. Was the Bill signed by a Partner? 3. Has it been delivered to the right party i.e. who is the Client? It may not be a Union or Insurance Company. 4. W  ere you entitled to render a final Bill i.e. have you completed the work? 5. Have you given the Client the appropriate one month’s notice that unless he/she/they pays you will sue?

Do I have to give my Client an estimate? Prior to 6 October 2011 the Solicitor had to give to his Client the best information possible about the likely overall cost of a matter both at the outset and, when appropriate, as the matter progressed. (Solicitors Code of Conduct 2007). The new Solicitors Regulation Authority Code of Conduct 2011 confirms the same principle.

So what is “best information”? In Garbutt v Edwards (2004) it was held that on an inter parte Assessment the fact that the Solicitor did not give his Client an estimate was a matter for the Costs Judge to take into consideration but was not fatal. Giving estimates has led to some heavy costs disputes, the case of Mastercigars Direct Ltd v. Withers LLP [2007] EWHC 2733 (Ch) being the most famous. It would seem that if a Solicitor gives an estimate he will probably be bound by it but there does not appear to be any sanction for failing to do so. Giving an inaccurate estimate is even worse. However, if we are to go down the road of budgeting which looks likely, we must all start thinking about estimates or budgets and getting them accurate or revised on a regular basis.

The Bill must comply with the current VAT regulations. It must be signed by a Partner if you intend to sue and must be delivered either personally, by post or left at the normal or last known address.

Who should I go to if my Client complains about me? It depends on the type of complaint. Most complaints are about poor service. Therefore this should be addressed to “The Legal Ombudsman”. He will deal with things such as delay, fee disputes and loss of documents. Having met the Chief Executive myself on a number of occasions I get the impression that they like to resolve things quickly and as amicably as possible often over the telephone. They can order a Solicitor to apologise; to refund all, or part of the fees, the return of papers and can order the payment of compensation. The Solicitors Regulation Authority (SRA) deals with allegations of dishonesty or discrimination. The SRA can also investigate non-payment of professional fees, issue a warning, impose a disciplinary sanction such as a fine, control how a firm or a Solicitor practices, refer a firm or an individual’s conduct to the Solicitors Disciplinary Tribunal, revoke recognition of a firm or even close a firm with immediate effect.

What should I do if I am unhappy with a fee from Counsel? Most of Counsel’s fees should be agreed before the work is undertaken. However, if you feel that a fee from Counsel is unreasonable you have a duty on behalf of your Client to challenge it. Any fee must be challenged within three months of receipt. The challenge should be referred to the Joint Tribunal of the Bar Council and the Law Society. The new code does not include the previous provision that except in Legal Aid cases, Solicitors are personally liable as a matter of professional conduct. The Bar is still excluded by way of etiquette from suing a Solicitor but can report a defaulting Solicitor to the Law Society.



KAREN SWALLOW Karen was born in Norwich, but moved to Stansted, Essex, when her father left the RAF to work at Stansted Airport as an Aircraft Electrician.

Upon leaving school Karen also went to work at the Airport for a Cargo Airline as a Technical Librarian; it was during this time of employment that Karen met and married her husband Robert who also worked for the Airline as an Aircraft Loadmaster, they have one son. Karen joined Kain Knight’s Bishop’s Stortford branch in 2003 as Administrator and she is responsible for booking all new instructions onto the Case Management System where she can track all matters to see how they are progressing. Once the matter has settled it is her responsibility to send all files and papers back to the client. If you contact Kain Knight by phone it will probably be Karen you speak to as she also mans the main telephone enquiry line.

In her spare time Karen likes to try and solve cryptic puzzles, quizwords and crosswords; she is also a member of a local quiz team (unfortunately not up to TV’s Eggheads standard); she also loves to travel and is a frequent visitor to Crete where she goes with her sister to visit her lucky niece who lives there.

KAIN KNIGHT NEWS: WWW.KAIN-KNIGHT.CO.UK I am delighted to announce the re-launch of our Company website.

Please log on to and have a look. Feel free to email me your comments good or bad at

We believe that the new site offers an improved user experience combined with a whole host of new client PENNY RIDOUTT, CLIENT CARE MANAGER facilities such as requesting a call-back, file collection and an improved costs helpline. The old favourites are still there though, just in a different format!



I am delighted to announce the re-launch of our website




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The most visible update can be seen in the site’s layout with some particularly interesting graphics.

InBrief issue 18  

InBrief issue 18

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