Menzies v Oakwood: Supreme court tackles question around when a solicitor's bill is paid

When is a solicitor’s bill paid? That seemingly simple question has been the subject of much discussion lately. The Solicitors Act 1974 Section 70 (4) limits the time to challenge a solicitor’s bill to a maximum of 12 months after it has been paid, and a client who challenges the bill outside of that 12 months is time barred. But when does the 12 months begin to run?

It would seem to be obvious that a bill is paid when money changes hands, but what happens when the solicitor is already holding funds for the purposes of paying the bill before the bill is delivered? Historically, the case of Re Thompson [1894] 1 QB 462 ruled that payment had taken place as soon as the bill was presented, as there had been a written agreement that a sum previously paid by the client to his solicitor could be used as a payment of costs. Re Thompson however dealt with a legal funding landscape very different to the present day.

In November 2015 Mr Menzies was seriously injured in a road traffic collision. Oakwood Solicitors were instructed to act for him in his claim for damages. The post-LASPO Conditional Fee Agreement the parties entered into allowed Oakwood to retain money from the damages obtained, to cover the success fee, After-The-Event insurance, and any shortfall between the bill of costs and the sums recovered from the paying party.

The claim for personal injury was successful. In March 2019 Oakwood received the agreed damages from the paying party, and passed the majority of the damages on to Mr Menzies, keeping back a sum to cover the success fee, ATE and shortfall. Oakwood then negotiated costs with the paying party, eventually agreeing a sum which crystalised the figure for shortfall. 

In July 2019 Oakwood sent Mr Menzies a Final Statute Bill, showing credit for the sum received from the paying party and subtracting the shortfall from the sum retained from damages. Oakwood then returned the balance (over £20,000.00) to Mr Menzies.

In April 2021, over 21 months later, Mr Menzies commenced proceedings against Oakwood seeking an assessment of the Final Statute Bill. Oakwood argued that the claim was time-barred, and at a preliminary issue hearing Costs Judge Rowley ruled that Mr Menzies was out of time to apply for a detailed assessment of the costs payable to Oakwood Solicitors (as the claim had been brought more than 12 months after payment of the bill). Costs Judge Rowley essentially held that payment took place in July 2019, when the payment was deducted from the money held by Oakwood.

Costs Judge Rowley granted permission to appeal, as there were no modern authorities on the point. In December 2022 the Honourable Mr Justice Bourne allowed the appeal, finding that the retention of funds “did not amount to a payment… because there was no sufficient settlement of account”, and that Oakwood had not informed Mr Menzies ”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 July 2023 the matter progressed to the Court of Appeal, where the Master of the Rolls Sir Geoffrey Vos, Lord Justice Lewison, and Lady Justice Simler, held that Oakwood’s bill was paid when they sent a compliant bill to Mr Menzies: the CFA specifically authorised Oakwoods to recoup their fees from the sums retained from Mr Menzies, and so payment of the bill “took place when, after delivery of the bill, the Solicitors made that deduction.” As a result, the Court of Appeal held that Mr Menzies had indeed been out of time, restoring the decision of Costs Judge Rowley.

Finally, in July 2024, the matter was heard in the Supreme Court. In the judgment (published on 23 October 2024), the Court found for Mr Menzies and restored Bourne J’s decision. The decision of the Supreme Court is that there must be agreement by the client before payment can be said to happen. The client must have opportunity to consider the bill and query it before payment. 

Much time and effort has been spent over the past few years answering what, initially, might have seemed a simple question. Following the Judgment of the Supreme Court solicitors will now need to consider their retainers to review the impact and ensure their billing processes follow the decision of the Court.