Falmouth House Freehold Company Ltd & Anor v Morgan Walker LLP

Factual and Procedural Background

Morgan Walker acted as solicitors for two companies, Company A and its parent Company B, for several years. Until 2 February 2009, the boards of directors of each company consisted of three individuals, including a director who was the primary contact with Morgan Walker. On that date, Extraordinary General Meetings (EGMs) were held to remove the existing boards and appoint new ones, though the validity of these EGMs—and thus the legitimacy of the new directors—was disputed.

On 11 February 2009, Morgan Walker appeared at the first hearing of winding-up petitions against the companies, with the petitioner being a former director. Morgan Walker supported the petitions as a creditor, claiming outstanding legal fees amounting to approximately £8,190 for Company B and initially £201,417.07 for Company A, which they agreed to reduce to £200,000 if paid promptly.

The current solicitor for both companies did not receive copies of the relevant invoices dated 20 November 2008 and 9 February 2009 until 22 October 2009, shortly before a scheduled hearing. Both invoices were headed "Invoice Professional Fees" and included statements of costs with information on how to challenge the fees, including under the Solicitors Act 1974.

Prior to the petitions, Morgan Walker served a statutory demand on Company A, asserting a debt of at least £31,417.07, with the balance held by Morgan Walker making up the total claimed amount of £201,417.07.

On 19 November 2009, Company A and Company B issued a claim form seeking a detailed assessment of the bills dated 9 February 2009 and 20 November 2008. The claim was heard by Master Simons on 11 February 2010, with Morgan Walker opposing the claim and submitting numerous invoices issued monthly.

Master Simons ordered a detailed assessment of three bills dated 11 November 2008, 20 November 2008, and 9 February 2009. Morgan Walker appealed with permission granted by Mann J, limiting the appeal to the issue of "special circumstances" required under section 70(3) of the Solicitors Act 1974 for assessments made more than 12 months after delivery of the bill or after payment.

Legal Issues Presented

1. Whether "special circumstances" exist to justify a detailed assessment of the solicitors' bills under section 70(3) of the Solicitors Act 1974, given the timing of the claim relative to the delivery of the bills.
2. Whether the bill dated 20 November 2008 constituted a final bill or a statute bill affecting the timing for the assessment claim.
3. The applicability and sufficiency of the grounds for special circumstances, including the size of the fees and the clarity of the invoices.

Arguments of the Parties

Appellant's Arguments

• The large sums involved in the fees should not constitute special circumstances, relying on precedent from Winchester Commodities Group Ltd v RD Black & Co [2000] BCC 310.
• The bill of 20 November 2008 was issued for settlement purposes only and was preceded by a series of interim invoices, potentially affecting the timing for assessment.
• The fees had been approved by the old board of directors, suggesting no special circumstances existed.

Respondents' Arguments

• The existence of disputes between the old and new boards and the large sums involved create special circumstances warranting detailed assessment.
• The invoices were confusing and lacked proper detail, making it difficult to understand the charges and justifying further scrutiny.
• Morgan Walker's failure to provide supporting papers reinforced the need for detailed assessment.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by identifying which bills were subject to the restriction under section 70(3) of the Solicitors Act 1974. The bill dated 9 February 2009 was not restricted, and the 20 November 2008 bill was considered the final bill entitled to detailed assessment without the need to show special circumstances. The issue of special circumstances was therefore limited to the bill dated 11 November 2008.

The court noted that the discussion of special circumstances focused solely on the 11 November 2008 bill. The costs judge, Master Simons, reasoned that the presence of disputes between the old and new boards, the large sums involved, and the confusing nature of the invoices constituted special circumstances. Morgan Walker’s concession during the hearing that special circumstances existed further supported this finding.

The court rejected Morgan Walker’s argument that the amount of fees alone was irrelevant, distinguishing the cited precedent and emphasizing that large fees requiring explanation can be special circumstances. The confusing and unclear invoices, combined with the lack of supporting papers, reinforced the need for detailed assessment.

Recognizing that the determination of special circumstances is a value judgment, the court deferred to the specialist costs judge’s assessment. Applying the principle that appellate courts will not overturn such findings absent a strong case, the court found no error in Master Simons’ decision and dismissed the appeal.

Holding and Implications

The court DISMISSED THE APPEAL, affirming the costs judge’s finding that special circumstances existed to justify a detailed assessment of the solicitors’ bills dated 11 November 2008.

This decision directly affects the parties by requiring Morgan Walker’s fees to undergo detailed scrutiny despite the timing restrictions under section 70(3) of the Solicitors Act 1974. The court did not establish new precedent but applied existing principles regarding special circumstances and the deference owed to specialist costs judges in value judgments.