The Supreme Court today declared that solicitors cannot deduct their costs from a client’s compensation without explicit agreement on the exact amount, marking a significant interpretation of client rights.
The Supreme Court has clarified the obligation for solicitors to obtain client approval on the specific costs deducted from damages. This decision overturned a previous Court of Appeal ruling, reinforcing the necessity for explicit client consent on the amounts deducted, rather than just an agreement in principle. The ruling was delivered in the case of Oakwood Solicitors Ltd v Menzies, focusing on when the time begins for seeking a cost assessment.
In the particular case under review, the court examined a settled personal injury claim for £275,000. The conditional fee agreement had permitted solicitors to reclaim their 25% success fee from the compensation, capped at 25% of the total. Consequently, £35,711 was deducted, a decision the client contested two years later over the specific deduction amount.
Lord Hamblen, delivering the court’s unanimous judgement, stressed the need for detailed billing to ensure clients can review and agree to the particulars of costs. His stance refuted arguments suggesting the ruling complicates practice management for law firms. He emphasised the long-standing requirement for a ‘settlement of account’, which mandates an agreement on the precise sum to be deducted, failing which client protection could be compromised.
Despite the arguments presented by Oakwood Solicitors’ counsel indicating potential negative impacts on legal practice efficiency, the judgement underscored several points supporting the ruling. These included the option for law firms to seek client agreement through fixed fees or pre-determined formulae, confirming that historical practice had not demonstrated significant difficulty in applying these principles.
The judgement also highlighted that modern communication tools should facilitate easier client-solicitor agreements, reducing concerns about administrative burdens. It was noted that solicitors could make contractual arrangements to gain explicit acceptance from clients regarding bills.
Lastly, the court acknowledged that while cost assessments could be burdensome, they are often necessary to uphold client rights. Should such an assessment confirm the solicitor’s claim, they may recuperate their costs even if the client remains non-compliant. James Green of JG Solicitors, representing the client, acclaimed the judgement as a triumph for consumer rights, providing much-needed clarity to the solicitor-client cost relationship.
This landmark decision by the Supreme Court underscores the importance of transparency and client rights in solicitor-client financial interactions, reinforcing the necessity of explicit agreements to protect clients.
