CKFT v Minkin: counting the costs and the lessons learned. By Eleanor Webster

Divorce|May 11th 2012

When you instruct a solicitor in your matrimonial case you receive a costs estimate which gives an estimate of likely costs. If the figure mentioned is acceptable and you agree, a retainer letter is signed.

Then the unexpected happens, the case takes a sudden and unexpected turn, there is a change of course, the legal costs increase, you receive the bill and …you feel aggrieved.

In almost all cases the costs estimate can be reviewed, communicated to and then agreed by you before the costs are incurred. But if the work is part of an urgent matter in court, it just may not be possible.

Tensions with the increased bill rise between you and your solicitor as you complain of the unexpected hike and he or she explains the costs are justifiable and seeks payment. You, perhaps cash-strapped at the time, suggest the solicitor should wait to be paid, or paid out of an order for costs you hope will be obtained against the other party. But the solicitor, who has the expenses and outgoings of an office to meet each month, flatly refuses – as is his right.

If the bill still isn’t paid, the solicitor then refuses to take any further action until it is and he receives some more money on account for future costs. Tensions heighten even further, and you believe the solicitor is holding you to ransom and that he has effectively “sacked” you. Worse still the inaction is prejudicing your case; the solicitor believes you are being wholly unreasonable. He has done the work in good faith, it wasn’t his fault the costs increased and he wishes to be paid. He isn’t prepared to run the case any further while awaiting payment at some point in the future.

If such a dispute isn’t resolved swiftly, commercially and amicably, the solicitor-client relationship will be irrevocably fractured, and the resulting costs of that dispute will be out of all proportion to the original bill. So, should the client have paid the solicitor? What do you think?

Here Ellie Webster of our Hale office, looks in greater detail at one recent case and a dramatic outcome that in many ways provides the answer…

The subject of costs has long been a thorny issue in law and a recent case perfectly illustrates the complexities involved, highlighting both the proper recourse open to disgruntled clients and the often fragile interplay between measuring actual service provided by a solicitor against the initial estimate provided at the outset.

Cawdery Kaye Fireman & Taylor v Minkin [2012] EWCA Civ 546 concerned disputed costs between firm Cawdery Kaye Fireman & Taylor (CKFT) and its client Mr Minkin and was heard before the High Court and then Appeal Court this spring. The firm of solicitors was originally instructed to act for Minkin in matters relating to the former matrimonial home. Due to unforeseen complications, increased fees were incurred that the client referred to a costs judge.

Solicitors are obliged to provide a costs estimate that gives parameters for the likely costs to be incurred in pursuing the case to its conclusion. Yet even with the benefit of experience, such estimates are exactly that: a projection of likely costs. Marilyn recently touched on some of the complexities involved, in her blog on the Legal Ombudsman’s suggestion that solicitors should move towards a “more commercial” system of detailing costs. The reality is that, even with the best will in the world, cases frequently follow imperceptible twists and turns. Myriad problems can mean that costs often mount unintentionally.

A costs estimate is agreed

Mr Minkin first instructed CKFT to act at a hearing in relation to Mrs Minkin’s application for an occupation order of the former matrimonial home, and a non-molestation order. They provided Mr Minkin with a costs estimate of up to £3,500 plus VAT, although the solicitor with conduct of the file added that he would “try to keep the costs down as much as possible, hopefully to £3,000 plus VAT”. CKFT’s terms made clear that the estimate was only a guide, and that there could be no guarantee that the final charge would not exceed the estimate. Further, that there are “many factors outside our control which may affect the level of costs”.

The terms also provided an explanation of the conditions for payment of invoices and payment on account. It was also made clear that it was open to the client to terminate the retainer in writing at any time, but that the firm could only stop acting “on reasonable grounds and on giving [you] reasonable prior written notice”.

An initial payment on account of £2,000 was made by Mr Minkin, with a promise that further monies would follow.

Complications arise

The day before the hearing, it was discovered that Mrs Minkin had in fact left the family home and let it to tenants. As a result the occupation order was dismissed and her application for a non-molestation order was adjourned. Not unreasonably perhaps, Mr Minkin wanted his share of the forthcoming rent and, in the longer term, the tenants out of the home so that he might take possession of a property he jointly owned. Crucially, this shifted the goal posts and led to an increased workload for the solicitor.

When the CKFT’s bill was issued, it came to £3,490.00 plus VAT, along with disbursements (including counsel’s fees) of £1,271.50. The bill was payable on presentation and included notes as to the options available to Mr Minkin to have the costs reviewed should he be dissatisfied. Mr Minkin was shocked and made it clear to the solicitor that he would not be able to pay the excess costs and that he required a costs order against his wife at the eventual hearing in order to pay the outstanding fees.

An exchange of several emails followed over the next few days as the solicitor explained that the complication of tenants now residing in the home had increased costs. In these emails, Mr Minkin repeatedly instructed the solicitor to obtain the rental income and proceed with an application for possession, yet at the same time refusing to make any further payment towards the outstanding fees. The solicitor made clear that he could not launch possession proceedings without the invoice being settled and without there being monies on account to deal with the new application.

Challenging a solicitor’s bill

If he was dissatisfied with the costs, Mr Minkin should have taken stock at this point and pursued one of the avenues open to him to formally challenge the invoice. There is already a thorough procedure to deal with reducing a bill: the assessment procedure of a solicitor’s bill of costs through court. A judge considers a solicitor’s bill, scrutinising it against the files and hears detailed arguments, deciding if the bill is fair and deducting any costs they believe should not be paid by the client. If more than 20 per cent of the bill is deducted, the solicitor pays all the costs of the court proceedings. If the deduction is less, the client pays. Instead, Mr Minkin refused to pay while insisting that further substantive work be undertaken.

Severing the contract

Mr Minkin proceeded to attend the property in person and apparently conduct threatening conversations with the 15-year-old daughter of the tenants. Mrs Minkin immediately sought an emergency occupation order without notice. When Mr Minkin called CKFT to instruct that an urgent fax be sent to the court on his behalf to vacate the property without a notice hearing, he was advised by the solicitor’s secretary that such a course of action would be fruitless, and that in any event CKFT could not continue to act until the invoice had been settled and further payment on account had been made.

The response was a number of written criticisms of the level of service and costs provided by the solicitors, with Mr Minkin expressing a lack of confidence in the firm. A further email stated that: “I would have liked to continue to work with you but I feel we have got nowhere since the hearing”. The solicitor therefore arranged for a final invoice to be issued, and confirmed that the firm would come off the court record.

Referral to a costs judge

Mr Minkin sought that both invoices be assessed by a costs judge. Master O’Hare came to the view that CKFT had wrongfully terminated their retainer and had not completed the entire contract. He ruled that the solicitors should not receive any sum for the work done and should repay any sums received. On his assessment, the bills were reduced in part, and he awarded the costs of the detailed assessment to Mr Minkin. It was held that Mr Minkin had reasonable justification in not paying the bills due to CKFT exceeding its estimate, and the work not having reached its conclusion. CKFT therefore had no right to suspend work.

On appeal to the High Court, Mr Justice Cranston upheld the decision of Master O’Hare, stating that the firm did not have the right to terminate the retainer, and that accordingly it was in breach of contract when it “downed tools”.

The Court of Appeal

Despite the very small sums involved at the root of the application, the case then came before the Court of Appeal. Lord Justice Ward examined the wording of the emails between solicitor and client and considered that CKFT had rightfully suspended the retainer. He found that:

  • Mr Minkin had no reasonable justification for withholding payment. The terms had made clear that the estimate was only a guide.
  • Although he had the right to formally challenge his bill or to have the charges reviewed by the court, he did neither. Further, Mr Minkin “could not reasonably expect his solicitors to wait for payment until they had an order for costs made against Mrs Minkin. That is not the way the world works and Mr Minkin was well aware of that fact”.
  • CKFT was entitled to suspend the retainer. That suspension was never lifted on the firm’s part and it was Mr Minkin who in fact terminated the retainer, when he made clear that he had no confidence left in CKFT, and that he would have liked to continue to work with them but felt he had “got nowhere since the hearing”.

Lessons learned

It is absolutely vital that clients always read a retainer letter carefully. If dissatisfied with an invoice, they should take prompt action in line with the firm’s formal procedures. It is counterproductive to let matters drift, and in the words of Lord Justice Ward: “how absurd that such a lot of money has now been spent litigating over such a small sum”.

Similarly, solicitors must ensure that, as a matter of good practice, costs estimates are well thought-out and frequently reviewed, revised if necessary and with clear explanations given.  There should be clear rights within the firm’s terms of business to stop work for a client who refuses to pay. Both solicitors and clients need clear and frank discussions when concerns arise over invoices issued to avoid, if possible, the stalemate and great expense which arose in Mr Minkin’s case.

Eleanor Webster graduated from the University of Bristol with a first class degree in Law and French in 2005. She went on to complete her Legal Practice Course at Nottingham Law School, achieving a distinction and the Resolution prize for the Family Law Elective.

After completing her training contract with a large law firm in Manchester, Eleanor Webster joined Stowe Family Law LLP upon qualifying in 2009.

Author: Stowe Family Law

Comments(3)

  1. DT says:

    This is really interesting, well presented (if not a little disturbing) Eleanor.

    I cannot BELIEVE that that this case got as far as the CA! Not just because of the small sums involved but because it was plain to see that CKFT were absolutely right and yet it took a third judge to see this?! I was surprised that the first judge didn’t get it right, shocked that the second didn’t either and dismayed that it took a CA judge to work sensibly though the issues! Good grief!! No wonder some people are loosing faith in the legal system!

    What’s more, I think the initial estimate (and it is only an estimate and NOT a quote) was pretty good! I would have been chuffed with such accuracy.

    If you want expert advice on such matters – you have to pay for it; it’s not covered by your National Insurance contributions! 

    Trust is a two way relationship. The client must have trust in the firm, but the firm (assuming they have acted appropriately and they clearly have here), need to know that they’re profit costs are going to be met.

    A Disgruntled DT!

  2. DT says:

    Sorry “their profit costs” – I was typing with such speed I forgot myself!

  3. Ellie Webster says:

    HI DT

    I found it interesting too, particularly the contents of his emails to his solicitor, although I am confident he is not the first client to provide instructions for substantive action whilst simulatenously questionning bills and asserting his inability to pay!

    Ellie

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