Oakwood Solicitors Ltd v Menzies

Oakwood Solicitors Ltd v Menzies [2024] UKSC 34 is a Supreme Court decision about when a solicitor’s bill counts as “paid” under section 70 of the Solicitors Act 1974. That matters because once a bill has been paid, the client’s route to court assessment becomes much stricter and can disappear entirely after 12 months.

The court rejected the idea that payment happens automatically just because the client signed a retainer allowing deductions from money held by the solicitor and a bill was later delivered. In this context, there must be agreement to the amount taken for that bill, although agreement can sometimes be inferred from conduct.

The dispute began with a personal injury claim. Mr Menzies was seriously injured in a road traffic accident on 29 November 2015 and instructed Oakwood Solicitors under a conditional fee agreement dated 17 December 2015.

The CFA said that if the claim succeeded, he would pay Oakwood’s basic charges, disbursements and a success fee set at 25% of basic charges. The total was capped at 25% of the compensation received after deducting any fees and expenses recovered from the other side.

The agreement also said the balance of the firm’s charges would be paid out of compensation and that he agreed to let the firm take those sums from compensation monies received. That wording gave Oakwood authority in principle to deduct money from funds it held for him.

The claim later settled for £275,000 in damages, subject to CRU and costs. After adjustments, the defendant paid a net sum of £210,004.85. Oakwood retained £58,632.79 from the sums paid by the defendant in its client account, including an insurance premium.

On 25 March 2019, the firm transferred £25,000 from client account to office account. On 18 April 2019, Oakwood sent an Interim Statute Bill and related costs documents. The letter said recoverable costs from the defendant would be negotiated.

The interim bill showed total costs of £83,711.20 and set out amounts retained from damages for costs, disbursements and VAT. Inter partes costs were later agreed with the defendant at £38,000.

On 11 July 2019, Oakwood paid Mr Menzies £22,629.09, said to be the difference between the sum retained and the sum then stated to represent the shortfall. On the same date, it sent a Final Statute Bill for £73,711.20. That bill said that unless otherwise stated in the covering letter, the total charge had been deducted from damages as agreed.

Mr Menzies applied on 1 April 2021 for assessment of the final bill under section 70. The immediate fight was not yet about whether the amount charged was reasonable. It was about whether he was already too late to ask for assessment because the bill had been “paid” more than 12 months earlier.

The Supreme Court had to decide what “payment” means in section 70 of the Solicitors Act 1974 where a solicitor already holds money for the client and deducts fees from it.

The client said payment requires agreement to the amount being taken for the bill. The solicitors said payment is complete if there is a prior agreement allowing deductions from client money and a compliant bill is later delivered showing the amount. On that argument, no further agreement to the amount would be needed.

The difference mattered because section 70 gives clients a more generous route to challenge bills that have not been paid. If payment could happen simply through a deduction authority plus delivery of the bill, the stricter post-payment time limits would start running before the client had a real chance to review the bill and decide whether to challenge it.

The Supreme Court allowed the appeal and restored Bourne J’s order for an assessment. Lord Hamblen gave the judgment, with the other Justices agreeing.

The court held that, for section 70 purposes, payment by deduction or retention requires agreement to the sum taken or to be taken in payment of the bill. A general earlier agreement in the retainer that fees may be deducted from funds held for the client is not enough by itself.

The court looked at ordinary meaning, statutory context and purpose. It said payment in this setting is not payment of an agreed price or fixed fee. Here, the amount was not fixed in advance. The only agreed formula was a cap, not the actual amount payable. The amount was to be explained in a delivered bill, and the client had a statutory right to challenge whether it was reasonable.

The court also said section 70 is built around delivery of a compliant bill and the client’s opportunity to consider it. The statutory scheme assumes payment after delivery, not by delivery itself. If payment could happen on delivery of the bill, or effectively because of delivery, the client-protection purpose of the regime would be weakened.

The judgment relied heavily on earlier authorities going back to the 19th century. Those cases consistently treated payment by retention or deduction as requiring a settlement of account, meaning agreement to the amount taken for the bill.

The court accepted that agreement does not always need to be express. In an appropriate case it can be inferred from conduct, especially where a client accepts the balance after a clear account has been rendered.

The court rejected the Court of Appeal’s broader approach that the client only needed to consent to the transfer of money, not the precise amount. In the Supreme Court’s view, that would allow payment to occur before the client had any proper opportunity to see, consider or take advice on the bill.

The case moved through several levels before reaching the Supreme Court.

First, Costs Judge Rowley held on 11 April 2022 that payment for section 70(4) purposes had occurred more than 12 months before the application, so the claim was barred. He did not specify the exact payment date, although the Supreme Court noted that he appears to have treated the date of payment as the date the Final Statute Bill was delivered, 11 July 2019.

He also said that if it had been open to him to consider special circumstances, he would have found them. He described the final bill and accompanying letter as “amongst the most impenetrable documentation” he had seen. He further noted that there was no explanation of why only approximately 17% of the solicitors’ profit costs had been recovered from the defendant.

Mr Menzies appealed. On 14 December 2022, Bourne J allowed the appeal, holding there had been no payment because there was “no sufficient settlement of account” between client and solicitors.

Oakwood then appealed to the Court of Appeal. On 14 July 2023, the Court of Appeal allowed the appeal. It held that the client’s earlier agreement under the CFA that the solicitors could deduct money, together with delivery of the Final Statute Bill, was enough to amount to payment for section 70(4) purposes.

The Supreme Court granted permission to appeal on 21 November 2023, heard the case on 3 July 2024 and gave judgment on 23 October 2024. It allowed the appeal and restored Bourne J’s order for an assessment.

If you are a solicitor, this case is directly about your billing and the section 70 assessment regime. If you are not a solicitor, the case does not automatically change your sector’s legal rules. But it does offer a practical and durable lesson about deductions, invoices and customer acceptance.

The key distinction is between authority to deduct and agreement to the amount deducted. A customer may sign terms saying you can take fees from money you hold. That does not always mean the customer has accepted a later amount that depends on variable work, layered charges, caps, recoveries, adjustments or discretionary calculations.

The risk is lower where the fee is fixed in advance or determined by a clear mathematical formula. The risk is higher where the amount is technical, changeable or hard to understand from the documents sent. In those cases, poor billing hygiene can create disputes about what was actually charged and whether the customer really accepted it.

This is also a reminder that timing rules often turn on process. A business may think it has been paid because it has moved money internally or applied a deduction. But if the paperwork is confusing and the customer has not clearly accepted the amount, that assumption may be challenged.

One reason this dispute became serious was the quality of the billing documents. The judgment records the lower court’s description of the final bill and covering letter as “amongst the most impenetrable documentation” it had seen. That is a practical warning in itself.

When a business sends several documents with different figures, technical labels and moving parts, customers may not know what has actually been charged, what has already been deducted and what remains under discussion. That makes it harder to show acceptance of the amount and easier for a dispute to grow.

Good billing documents should do more than state a total. They should reconcile the numbers. If money has already been retained, say so clearly. If some costs are recoverable from a third party and some are not, explain the difference in plain language. If an earlier estimate, cap or interim figure has changed, show why.

Conduct matters too. The Supreme Court accepted that agreement to the amount can sometimes be inferred from conduct. That means your records of customer responses, acceptance of balances, approvals and follow-up communications can matter just as much as the contract wording.

If your business holds customer money and may deduct charges from it, this case supports a more disciplined process.

Start with the contract. Make the deduction authority easy to find and easy to understand. If possible, fix the fee in advance or use a clear formula. If the amount may vary, say what drives the variation.

Then focus on the billing event. Send a clear invoice or statement before treating the account as fully settled. Show the amount being taken, the basis of calculation and the resulting balance. If the amount differs from an estimate or expectation, explain why.

Finally, think about evidence. If the customer expressly approves the amount, keep that record. If acceptance may be inferred from conduct, make sure the surrounding documents and communications are clear enough to support that inference.

These steps will not remove every dispute. But they reduce the risk that a customer later says they agreed you could deduct something, while never agreeing what that something was.

The dates matter because the whole dispute turned on whether more than 12 months had passed from payment of the bill before the client applied for assessment.

The Supreme Court’s decision does not itself decide the amount of the bill. It restores the order allowing the bill to be assessed. The practical significance is that the client was not shut out by section 70(4) on Oakwood’s argument about payment.

This decision is often discussed more broadly because it contains useful lessons about billing and deductions. But its direct legal effect is narrower.

The case is specifically about solicitors’ bills under section 70 of the Solicitors Act 1974. It is not a general Supreme Court ruling that every business must obtain the same kind of agreement before deducting charges from customer funds.

What other businesses can take from it is a practical analogy. If your charges are variable, technical or hard to follow, a broad deduction clause may not be enough to avoid later arguments about what the customer actually accepted.

The safer commercial approach is clear documents, a transparent calculation and a record of the customer’s response. That is good practice whether or not your sector has the same statutory regime as solicitors.