Court of Appeal resolves a long-standing tension between Solicitors Act 1974 and conditional fee agreements (Signature Litigation LLP v Ivanishvili)

Upholding Costs Judge Leonard’s decision, the Court of Appeal has cleared the way for Georgian businessman Bidzina Ivanishvili to pursue a Solicitors Act assessment of Signature Litigation’s bills of almost ￡13 million….should he wish to do so some time in the future.?

The judgment is of wider interest as it rejects a claim that interim bills in a CFA case can be statutory invoices;? providing confirmation that the strict time limits for the client to mount his challenge, set out in section 70 of the Solicitors Act, do not begin to run as each interim CFA bill is delivered.? ?The judgment is also noteworthy, as it is one of a growing number to highlight the need for an overhaul of the assessment provisions in the 1974 Act.?

Background

Mr Ivanishvili engaged Signature in 2016, in connection with multijurisdictional litigation with Credit Suisse.? The parties entered into a conditional fee agreement pursuant to which the client was obliged to pay 65% of Signature’s standard fees in accordance with the firm’s normal invoicing and payment terms (which provided for monthly billing), with 35% of standard fees and an uplift fee and a success fee due only in the event that certain outcomes were achieved. Signature delivered 79 invoices between March 2016 and October 2022, all of which were paid.

Signature terminated the retainer in September 2022, but did not abandon any further claim for payment (the potential uplift and success fees that may yet become due) – the outcome of the litigation may not become clear for some years. ??Mr Ivanishvili sought to preserve his right to challenge Signature’s charges, and for that purpose filed an application in November 2022 under CPR Part 8, seeking a declaration that the invoices were not ‘statutory’ bills, alternatively seeking an assessment under section 70 of the Solicitors Act 1974.?

The Costs Judge’s decision

Mr Ivanishvili argued that as Signature’s bills only represent a part of the potential fees for the period specified by each invoice, they lack the finality that is essential if they are to be treated as interim statutory bills (i.e. no final bill can be delivered until the final outcome of the litigation is known, certainly as long as the solicitors do not irrevocably abandoned any claim to the future conditional payments).? He was met by a common objection – that he was out of time to mount a challenge because each of the 79 bills was a statutory (complete or final) bill for the purposes section 70.? Signature’s position was that each bill complied with the requirements of section 69 of the 1974 Act in relation to signature and delivery, and each met the additional criteria ?- including that of finality - established by case law;? with the implication that the strict time limits for the client to mount his challenge, set out in section 70, began to run on each bill from time of delivery.?

Whilst Costs Judge Leonard found, in relation to the form of the bills,? that there was nothing ‘obviously inconsistent’ with their being statutory bills, he disagreed with Signature on the issue of finality, finding that a bill for part-payment (the ring-fenced 65% of standard fees) could not be a ‘bill of costs’ for the purposes of section 70.? The test, he found ‘is not whether a given invoice is final for the charges it represents, but whether it incorporates a final charge for the work it represents’: ?See Ivanishvili v Signature Litigation LLP [2023] EWHC 2189 (SCCO).? The judge also found that there was in fact no agreement for delivery of interim statutory bills and noted that if it were possible to deliver an interim statutory bill in respect of the unconditional element of fees under a CFA, the retainers should ‘contain clear terms overcoming the difficulties of reconciling the conditional element of the CFA with the concept of a complete and final bill’.?

The Court of Appeal’s decision

The appeal turned on the issue of finality – the tension between the requirement that an interim statutory bill must be final and complete in relation to the work that it covers, and (today, common) arrangements for remuneration – such as CFAs – under which the final figure for that same work may not become clear until some time later.

The court found that the requirement that an interim statutory bill must be final and complete ‘is too embedded in the authorities to be doubted’ [52].? However, Signature advanced various arguments to the effect that the finality requirement goes no further than to ensure that the bill should be final and complete as regards its subject matter (that it should be ‘final [only] in respect of the things which have been billed’ - thus somehow treating the standard fees and conditional element as separate ‘things’).? Lord Coulson countered: ‘[T]hat is the complete antithesis of an interim statutory bill.? The advantages of an interim statutory bill, in terms of certainty and clarity, arise out of the fact that it cannot be revisited.? It is therefore impossible to qualify the finality and completeness of an interim statutory bill; as soon as you do, it ceases to be an interim statutory bill’? [56].?

Signature invoices, were found to be neither final nor complete - ‘On a proper characterisation of the contingent charges, the same work and/or the same period covered by any particular invoice could be revisited in the future when the appellant made a further claim for the Additional Portion of the Standard Fee (and potentially the Uplift and Success Fees too)’ [48]? That characterisation, said Lord Coulson, is supported by the statutory definition of a CFA (see section 58 of the Courts and Legal Services Act 1990) which is clear that whilst part of the payment for work done may be conditional, that conditional element remains ‘emphatically part of the fees for that work’[49].? In other words, conditional fees are still fees and not something apart.?

Comment:

Section 70 contains significant restrictions on the client’s rights to call for assessment of her solicitor’s bill(s), yet it predates the availability of modern modes of funding (including CFAs).? Furthermore, it is predicated on an outdated understanding of the litigation retainer as being an entire contract in relation to which the right to payment (and with that the timetable for mounting a challenge) arises only on completion of the litigation contract, whereas in fact many retainers are structured differently, with interim invoicing (including delivery of interim statutory invoices) commonplace.?

Given the very tight time limits under section 70 (3) and (4), when solicitors deliver interim statutory bills, the client is placed in the unenviable position of having to decide whether to challenge those bills as they are received, potentially making an enemy of her own solicitor at a time when she is fighting another enemy.? Whilst the judgment may be a comfort to litigants in Mr Ivanishvili’s position (i.e. those that retain solicitors on a CFA), other litigants must still, on occasion, make some very hard choices.? In rounding off his judgment, Lord Coulson put it this way:

‘In an ordinary case, a consumer of services may have up to six years to pursue claims against the services provider. But in the case of solicitors, s.70 drastically truncates that right: it offers a highly technical form of protection to solicitors by limiting the period of challenge to one year after the bill has been paid. That was not a problem in the past, because solicitors' bills were usually rendered at the end of their work. Now solicitors sensibly seek interim payments, but they still want the protection of s.70, even under CFAs. As the authorities demonstrate, they make uneasy bedfellows.’

Link to judgment:? Signature Litigation LLP v Ivanishvili [2024] EWCA Civ 901 (01 August 2024) (bailii.org)