The Supreme Court has ruled that solicitors cannot deduct costs from clients’ damages without explicit consent for the precise amount.
- This ruling overturns a previous Court of Appeal decision concerning the timing of client consent for cost deductions.
- Lord Hamblen highlighted the need for detailed bills to be presented to clients, ensuring transparency and protection.
- The case involved Oakwood Solicitors Ltd’s conditional fee agreement and the subsequent challenge by the client on deductions made.
- This decision is seen as a significant victory for consumer rights and demands adjustments in solicitor practices.
In a landmark decision, the Supreme Court has determined that solicitors must obtain explicit agreement from clients regarding the specific amount of costs to be deducted from their damages. This ruling overturns the Court of Appeal’s previous stance, which allowed deductions once a general agreement was made, irrespective of the precise sum involved. Such clarity is now deemed essential to protect client interests.
Delivering the court’s unanimous decision, Lord Hamblen emphasised the importance of clients receiving a detailed bill before any deductions. The judgement underscores the statutory scheme’s emphasis on the delivery of comprehensive billing information, which allows clients sufficient time and information to consider the specifics of cost claims. This process is integral to ensuring client protection from unanticipated deductions, thereby upholding their rights.
The specific case, Oakwood Solicitors Ltd v Menzies, revolved around a personal injury settlement. Here, a conditional fee agreement permitted the solicitors to deduct a success fee capped at 25% from the client’s total compensation, which was £275,000. Despite recovering £38,000 from defendants, Oakwood Solicitors retained £35,711 as fees, which a client contested two years after the deduction.
Initially, Costs Judge Rowley supported the notion that the client’s agreement at the settlement time implied consent to the deduction. However, this interpretation was challenged and eventually overturned, with the Supreme Court ruling clarifying that a simple delivery of the bill does not equate to consent for its amount. Such a stance enforces a necessary settlement of accounts between solicitor and client, aligning with long-established legal principles.
Despite arguments from Oakwood Solicitors regarding potential disruptions to practice management, Lord Hamblen dismantled these concerns by highlighting the feasibility of pre-agreement on cost amounts or formulas between solicitors and clients. He further noted the evolving ease of client communication as a mechanism to facilitate this new requirement, reducing any perceived administrative burdens.
This decision, while causing some operational recalibrations for solicitors, is hailed as a triumph for consumer rights. It mandates a revision of retainer agreements to ensure compliance with the ruling, allowing clients to be more informed and assured about the financial implications of their legal undertakings.
The Supreme Court’s unanimous decision marks a pivotal moment for client rights and solicitor practices alike.
