Menzies reaction: Law firms urged to change retainers but should not fear flood of costs claims

Cost experts sought to play down fears that yesterday’s Supreme Court ruling in Menzies will open the floodgates for clients to challenge law firm accounts. The judges concluded yesterday that ‘payment’ for the purposes of the Solicitors Act requires an agreement by the client to pay the amount specified in the invoice. The customer therefore had more time to dispute the invoices and the cost dispute request was not time-barred.

The Leeds company at the center of the case warned the court of the serious repercussions of requiring customers to be informed of their bill before payments can be made. JG Solicitors, the firm that brought the costs challenge, described it as a victory for consumer rights and said the ruling provided vital clarity.

But commentators have tempered suggestions that the decision will bring a wave of challenges. Jack Ridgway, president of the Association of Costs Lawyers, agreed that clarity on the level of consent required before a lawyer can deduct their deficit costs was welcome. “Many law firms will now need to review their fees to ensure they still receive immediate payment whilst complying with the ruling. I am sure they will adapt quickly,” he added.

Nick McDonnell, director and costs lawyer at Manchester firm Kain Knight, said obstacles to bringing a costs claim will remain even with the Menzies decision.

Pointed in particular to the Court of Appeal comments in Faratysz x SGI Legal which made it clear that complaints to the High Court about petty expenses were to be discouraged. Instead, dissatisfied former clients were advised to use the Legal Ombudsman program.

McDonnell added: ‘Although Menzies may have opened the door to potential attorney fee challenges under the law, the obstacles a client faces thereafter will often slam that door in their face quite hard. The Court of Appeal’s not-so-subtle invitation to customers to use LeO’s complaints procedure, together with LeO’s relaxation in its own guidance on the timeframes within which a complaint can be made, seem to suggest that Menzies It is unlikely to open the floodgates as has been suggested.’

In Menzies Lord Hamblen decided that it was open to lawyers to agree to terms for their client that would help establish acceptance and agreement with the bill.

Dan Stacey and Alice Nash, of Hailsham Chambers, said this should act as an incentive for companies to ensure these issues are outlined sooner – even if lawyers think they may still be able to challenge the claims.

“If payment has not been made, if 12 months have passed since the invoice was delivered, there is no right to challenge the right,” explained Stacey and Nash. “The client still has to prove that there are “special circumstances” that give him the right to object under section 70(3) and lawyers can argue that such circumstances do not exist.

‘But there is no doubt that it is advisable that lawyers seek to include appropriate language in their retention documentation and/or their final invoices and accompanying correspondence.’