Truex v Toll [2009] EWHC 396, (Ch) [2009] All ER (D) 98 (Mar)
Chancery Division, Proudman J, 6 March 2009
In order for untaxed solicitors’ costs to constitute a liquidated sum capable of
founding a bankruptcy petition, any admission, acknowledgment or agreement converting the amount claimed from an unliquidated to a liquidated sum has to be one from which the client has bound himself not to resile. A mere acknowledgment will be insufficient to bind him to forego judicial assessment or determination.
Nicholas Preston (instructed by International Family Law Chambers) for the claimant. Duncan MacPherson (instructed by Cubism Law) for the defendant.
The defendant client retained the claimant solicitor in September 2006 to act for her in matrimonial proceedings. A final ancillary relief order had been made in April of that year. The solicitor instructed counsel and dealt with various matters including a hearing. A dispute arose with the client over the necessity of the hearing.
In March 2007, the client presented a list of perceived complaints about the solicitor’s services. He issued four invoices to her in respect of fees totalling approximately £15,000. She paid two invoices but nothing else. In March 2007, the solicitor applied to come off the record on the grounds of the client’s refusal to accept his advice or pay his fees. In August 2007, the solicitor served a statutory demand for the outstanding fees. The client did not comply or apply to set it aside, and the solicitor issued a bankruptcy petition based on the alleged debt. It was common ground that the chief registrar had been correct to hold that solicitors’ costs which had not formed the subject of a judgment, assessment or agreement were not a liquidated sum for the purpose of founding a bankruptcy petition.
The chief registrar also held, however, that there was no genuine dispute on the facts and, moreover, even if there had been a bona fide dispute, it was inconceivable that the client did not owe the solicitor a sum exceeding the statutory minimum of £750. He went on to make the bankruptcy order. The client appealed.
Proudman J:
Her ladyship considered Turner & Co v O Palomo SA [2000] 1 WLR 37, [1999] 4 All ER 353; Manches & Co (a firm) v Joseph [2001] All ER (D) 132 (Nov). As a matter of principle, a claim for solicitors’ fees not as yet judicially assessed or determined was not a claim for a liquidated sum which could be the subject of a bankruptcy petition, even if the period for challenge under the Solicitors Act 1974 had expired.
It was indisputable that the sum claimed became a liquidated sum once the fees had been assessed by the costs judge or determined in an action. The issue in the instant case was as to what else could convert a solicitor’s unassessed bill into a debt capable of founding a bankruptcy petition.
Bare admission
Counsel for the client submitted that it was insufficient to find a bare admission, agreement or acknowledgement that the invoices were correct. Where a debt was of an unliquidated sum because it had not been judicially assessed or determined that sum could only become liquidated if the client was bound by the admission, agreement or acknowledgment relied upon. Thus one had to look for a waiver of the right to assessment or determination. In order to constitute such a waiver, the client’s conduct had to be supported by consideration or give rise to an estoppel.
Doubtless a bare admission coupled with failure over a long period to challenge the bill would be strong evidence that the bill was reasonable. However, submitted the client, such conduct would not be enough to convert the amount of the bill from an unliquidated to a liquidated sum.
Agreement
There was logic in the argument that an agreement converting an unliquidated debt into a liquidated one had to be a binding agreement. That would mean an agreement for consideration, namely an agreement as to a fixed amount, or an agreement as to hourly rates and time spent in consideration of future services, or a compromise agreement, or conduct giving rise to an estoppel according to established principles.
Where the hourly rate had been agreed and where the client expressly agreed to pay for as many hours as the solicitor worked, or an agreement to pay a fixed sum, was made at the outset, or where further work was only undertaken on condition that the client agreed to pay outstanding invoices, there was consideration for the agreement and the client could not resile from it.
Whether a sum was liquidated and whether there was a defence to the claim were separate issues and the first had to be determined before the second was addressed. Accordingly any admission, acknowledgment or agreement converting the amount claimed from an unliquidated to a liquidated sum had to be one from which the client had bound himself not to resile. A mere acknowledgment would be insufficient to bind him to forego judicial assessment or determination.
On that basis it was not possible to say that any part of the work done by the solicitor in the instant case had been quantified, or was quantifiable by the bankruptcy court as a mere matter of arithmetic. The chief registrar had conflated the issue of whether there was a genuine dispute about a liquidated debt with that of whether the sum claimed was liquidated in the first place. The bill as a whole was capable of challenge as to quantum and was thus for an unliquidated sum. The same point applied to the chief registrar’s alternative finding that there could not be a genuine dispute as to at least £750 of the costs.
The appeal would therefore be allowed.
