The High Court has ruled that a costs bill can be challenged after the one-year time limit for requesting detailed assessment. In Menzies v Oakwood Solicitors, Mr Justice Bourne said Leeds firm Oakwood Solicitors had not made clear to a former client the procedure for objecting to the deduction of costs from his damages. Payment was therefore not effected by a settlement of account and a challenge could still be made.

He overturned the decision of Costs Judge Rowley who had ruled that the application for detailed assessment was time-barred because it was made more than a year after the relevant costs had been paid.

The alleged payment occurred when Dean Menzies’ solicitor, who was holding monies received from the other party to a personal injury claim, calculated what sum was owed to him for his costs bill and then paid the balance to the client.

Menzies had accepted an offer to settle his claim for £275,000 plus reasonable costs. The interim statute bill was for £73,700, of which £38,000 was recovered from the third party. Oakwood had retained around £58,000 to cover any potential shortfall in costs and finally deducted around £35,000, paying the remainder to the client.

Menzies said in evidence he was confused about the basis for this payment and trusted his solicitors to have worked out the sum correctly. More than 21 months after the final payment, and now represented by costs recovery firm JG Solicitors, he began proceedings against Oakwood seeking an assessment of the final statute bill.

Section 70 of the Solicitors Act allows assessment of a bill of costs as of right if an application is made within one month of delivery of the bill. Assessment may be ordered if the application is made after that time but within 12 months of delivery, before any judgment on the bill and within 12 months of any payment of it.

Menzies argued there was no sufficient informed agreement with Oakwoood for payment to take place, and instead there was a general agreement that payment would come from the monies held by the firm, and would not exceed 25% of the damages. It was submitted that the explanation of how costs would be calculated was ‘at best unclear’, and Menzies’ responses to the firm suggested he did not properly understand it.

The firm pointed out there was an agreement for a capped payment by deduction, and submitted that the final bill was sufficient to effect the necessary ‘settlement of account’.

The judge found that payment by retention of money from damages had been authorised in principle by the CFA, but the firm needed to obtain Menzies’ agreement to payment of the actual shortfall in order to demonstrate that the account was settled. If he had objected to that sum, settlement of account could not have been said to have occurred.

He added that the firm did not inform its client 'with sufficient clarity that he could object to the deduction with a reasonable time'.