What is a Fee Challenge Under the Solicitors Act 1974?

Part III of the Solicitors Act 1974 regulates the amount of disbursements and costs which a Solicitor can invoice within their bill to their client. Under this Act, the client has the ability to dispute the fees, such as success fee deductions, and disbursements within the Solicitor’s bill. This act applies to a large range of practice areas, including personal injury cases, conveyancing cases and contentious business litigation. With many companies now offering services to clients to assist in disputing their legal fees, these types of challenges are becoming more commonplace in the legal industry, which is why it is important that solicitors are aware of their duties under the Act, when opening and closing files. It is also important that they know how to defend this type of claim, if and when they arise.

What Should a Solicitor do When Opening a File?

If the case is based on a Conditional Fee Agreement, it is important that the Conditional Fee Agreement is drafted properly, and does not just routinely charge a 100% success fee. In the case of Herbert v HH Law [2019] EWCA Civ 527, it was shown that solicitors should undertake a proper and bespoke risk assessment at the start of every case, instead of applying a 100% success fee as standard across all cases.  The success fee calculated will determine what deductions can be taken, if any, from the client’s damages. It should also be noted that any retainer must make clear that the client may be charged more than they recover from the other side, as otherwise the Solicitor risks being limited to calculating any success fee as against any fixed costs recovered, in Fast Track personal injury litigation.

What Should a Solicitor Do When Closing a File?

The most important step which a Solicitor should routinely take when closing a file, is serving a signed statute bill. A Solicitor cannot enforce their fees to a client unless a statute bill has been properly delivered to the client, but equally, the timescale for a client to contest any deductions from their damages runs from the date of service of a statute bill.  If enforcing a Bill, the Solicitor has several options open to them to collect payment, including the obtaining of a charging order. If you serve a statute bill, this starts the clock ticking on any timescale for the client to contest any deductions.  This timescale is limited to one month if the statute bill is paid (which in the event of damages deductions, payment is immediate).  If the bill is not discharged, the same can be contested for up to twelve months post-service of the document. The statute bill should include a description of all work done on the file, and should be delivered to the client via post, in person, or via e-mail, if the client has requested. It is also imperative that you make sure any success fee deductions from damages is calculated correctly.  This must comply with the retainer, in that the correct success fee is used, and charges calculated against the WIP incurred at the hourly rates detailed in the CFA (presuming it states that the client may be charged in excess of any amounts recoverable from a paying party). Deductions must also comply with statute, and can only be calculated based on past damages (not future losses), and be capped at 25% of the same.

When Should a Statute Bill be Served on a Client?

  • At the end of the case, when all of the work agreed under the retainer or CFA has been completed.
  • Interim statute bills can be served when there is an express agreement for the solicitor to do so, and the client has been made aware of their entitlement to assessment under the Solicitors Act 1974.
  • Following a natural break within the litigation process, which allows each portion of the work being done to be treated as a distinct and separate part of the litigation.
  • Following the termination of a retainer or CFA, for example, if the solicitor has a good reason to terminate the CFA or retainer.

Defending a Challenge Under the Solicitors Act 1974

Proceedings for a challenge under this act can be held in the High Court or the County Court, and are dealt with under Part 8 of the CPR. The Solicitor can contest the Claimants entitlement to assessment, if there is sufficient reason to do so. If the Solicitor does not, or cannot contest the entitlement to assessment, section 46.10 of the CPR will apply for the costs to be assessed, in a similar procedure to that of detailed assessment.

How Can LPS Assist?

The Legal Practice Support team are always happy to help with any costs issues, including defending costs challenges under the Solicitors Act 1974. Our Costs Director and Costs Lawyer, Robert Collington, can be contacted via email on info@legalpracticesupport.co.uk or by telephone on 01204 930234. If you would like to find out more information on preparing your Cost BudgetBill of Costs, or the process of detailed assessment, have a look at these sections on our website. Feel free to have a look at our legal costs section to find out more about out legal costs services.