Underhill v Thackray Williams Solicitors

Underhill v Thackray Williams Solicitors [2024] Lexis Citation 3830

This was a further example of the risks to solicitors of not providing accurate costs information at the outset of a retainer with regular updates to enable a client to make informed decisions on incurring costs in her employment tribunal claim.

Where the firm had failed to provide accurate costs information at the outset and regular updates as to the increasing costs of the claim, the Judge disallowed undisclosed partner supervisory time (client had no notice) and also deprived the firm of the usual indemnity approach; rather the Judge provided a broad-brush assessment of reasonable costs

The Judge also exercised his discretion to disallow the firm’s costs of the assessment despite the firm coming within 20 percent of the costs sought on assessment.  In essence, the Judge relied on the lack of clarity in the firm’s bill as demanded and the lack of warning before costs were incurred to find that the client was justified in challenging the bill on assessment.  There was no order as to costs.

What are the practical implications of this case?

The case serves as a further useful reminder to lawyers of the importance of timely, accurate advice and information on costs at the outset of a matter and providing further updates as costs rise.

The case is also interesting in that the Judge disallowed the firm’s costs of the assessment even though the firm recovered sufficient costs to trigger the provision in section 70(9) of the Solicitors Act 1974 that provides for the usual rule that the costs of assessment will be borne by the client as the challenger to the invoice where the firm recovers a sum that is more than the total reduced by 20 percent.  However, there is a discretion to depart from the usual approach where the circumstances warrant it: see section 70(10)

What was the background?

The firm acted for the client in relation to her dismissal from her employment.  The firm provided initial advice in conference (confirmed in a long letter) for a fixed fee of £250 plus VAT.  A fee that the Judge (understandably) described as exceptionally good value but was explained as something of a loss in contemplation of further work.  The firm was also paid for advising on the effect of the Settlement Agreement.  The timed work suggested a bill of £2,000 plus VAT but the firm had agreed to accept a sum of £500 plus VAT which was paid by the client’s employer direct to the firm.

The disputed invoice related to work over a 5-week period between the initial advice retainer and the Settlement Agreement which was for work in negotiating the terms of the Settlement Agreement in principle.  The firm had initially sought to charge £5,863 plus VAT.  By the time of the assessment this had be written down to a figure £3,841 plus VAT.

However, the firm faced some challenges including that the fact of key fee earner was under the supervision of a partner.  While the fee earners charge out rate of £195 (moving to £210 during the retainer) was communicated to the client; neither the extent of supervision for the partner’s charge out rate was explained to the client.

The initial client care letter and subsequent communications promised regular updates on costs; but in fact, there was only one ‘update’ which was provided the day the Settlement Agreement was agreed in principle and the day before the invoice was rendered to the client.  The client predictably argued that this was not a meaningful update as the information could not inform any decision she could make at that time, the costs having already been incurred.

The Judge also found that the invoice provided was confusing as the hours at the front did not accord with the total at the end and neither appeared to be an accurate total of the times set out in within the schedule of times claimed.  While confusing, there was a write down in fees that was more than the best-case interpretation of the hours charged to the client.

What did the court decide?

The Judge disallowed the supervision time for the partner’s involvement in the case.

The Judge rejected the client’s argument that there was duplication between the £250 fixed fee for advice and the initial letter before action (which drew significantly on the advice according to the client).

Critically, the Judge found that there was insufficient updating information on costs and costs warnings timed to enable the client to make informed decisions.  This did not mean that the Judge disallowed all these costs.  However, it did mean that the Judge did not presume that these costs were reasonably incurred – that being the indemnity approach pursuant to CPR 46.9(3) – but rather had to assess a reasonable sum for himself.  The Judge taking a broadbrush assess the costs in the sum of £3,150 plus VAT.

The Judge went onto consider the costs of the assessment.  Ordinarily where the solicitor bill has been reduced by less than 20 percent (here it was reduced by just over 15 percent), the solicitor would be entitled to the costs of assessment – the usual rule pursuant to section 70(9) of the Solicitors Act 1974; but there is a discretion to order a different sum where there are features of the case to justify a departure: see section 70(10) of the Solicitors Act 1974.

Exercising that discretion in the client’s favour, the Judge made no order as to costs (both sides to bear their own costs of the assessment).

Case details

• Court: Senior Courts Costs Office
• Judge: Costs Judge Nagalingam
• Date of judgment: 06/12/2024

Article by Lauren Godfrey – first published by LexisNexis