In what has been hailed as a victory for consumers the Supreme Court has today ruled that solicitors cannot deduct their costs from client’s damages without their consent to the relevant solicitor’s bill.

In Oakwood v Menzies the five justices unanimously agreed that clients be allowed to consider the details of their bill before any deductions are made.

By way of background the Appellant, Mr Menzies suffered serious injuries as a result of a road traffic accident that took place in November 2015.  Oakwood solicitors acting for him were instructed under a conditional fee agreement.

Mr Menzies’s claim for damages settled for £275,000.00 in March 2019 and Oakwood received the balance of Mr Menzies's damages totalling £210,004.85.  At that point, they provided an interim bill as negotiations with the defendants for recovery of their costs were still ongoing.  Under the terms of the Conditional Fee Agreement, Oakwood said that they would retain 25% of Mr Menzies’s damages on account until negotiations with the defendants were finalised.  At the end of negotiations, Oakwood provided Mr Menzies with a final bill with their total fees of £73,711.20 of which they had recovered £38,000.0 from the defendants. This left a shortfall of £35,711.20 which Oakwood deducted from the sum they had retained on account, paying the balance of £22,629.09 to Mr Menzies.

Mr Menzies brought proceedings for the assessment of Oakwood’s bill two years later but due to the time that had elapsed, the costs judge at first instance found that the claim was time-barred under section 70(4) of the Solicitors Act 1974, being more than 12 months after “payment” of the bill.

However, the costs judge did grant Mr Menzies permission to appeal to the High Court and upon appeal the application for assessment was allowed.  That decision was later overturned by the Court of Appeal which stated that where the client had agreed to the deduction for costs, the time to challenge them was from the time the deduction was made even if the client has not consented to the deduction.

Today’s Supreme Court ruling has now overturned that judgement with the central issue being what constitutes payment ie. When does the 12 month limit start to run for assessing a solicitor’s bill.  Lord Hamblen stated that the mere delivery of the bill of costs does not suffice and the agreement to the exact sum to be taken should be obtained before any deduction.

The case has been hailed as a victory for consumer rights meaning that the client will need to give specific consent to authorise any deduction before statutory time limits start to run.

However, solicitors may be faced with delays in receiving their costs which may lead to extra work having to be undertaken.  Many solicitors may likely need to revise their practice to ensure that they still receive prompt payment while complying with this ruling.

See link to judgement here:

https://www.supremecourt.uk/cases/docs/uksc-2023-0115-judgment.pdf