In the underlying action to Tim Martin Interiors Ltd v Akin Gump LLP  EWHC 2951 (Ch), the Respondent had borrowed money from a bank, which loan was secured by a mortgage and guaranteed by two directors of the Respondent. The Respondent defaulted on payment, and the bank instructed the Appellant solicitors’ firm to enforce the mortgage and recover possession. A statement of the Respondent’s indebtedness to the bank included over £100,000 in the way of legal fees payable to the Appellant. The bank transferred the mortgage to a director of the Respondent (also one of the guarantors) in consideration of a payment which covered the Respondent’s indebtedness and which included the legal fees. The bank then paid the Appellant’s fees in full.
The Respondent commenced proceedings against the Appellant for taxation of the latter’s bill of costs under s.71 Solicitors Act 1974. At the assessment, the Master reduced the hourly rate which the Appellant had charged the bank, thereby reducing the overall bill, and ordered the Appellant to pay the balance to the Respondent.
On appeal, the court disagreed with the Master’s approach. A solicitor charges fees to his client pursuant to a contract between them (the retainer), and the liability under that contract is that of the contracting party. The solicitor is not a party to any arrangement by which the client’s liability is passed onto a third party, as it was in this case. His ability to recover his fees should therefore be unaffected by any such arrangement. In considering the effect of this external arrangement, the court was in fact considering which items in the bill of costs could be passed onto the third party, and not how much the client was liable to pay to his solicitor under the retainer. The third party was, therefore, only entitled to raise such objections as the client itself would be entitled to raise.
The court also found that the question of what was properly payable as between the Appellant and the bank was entirely separate from the question of what sums could be passed onto the Respondent. The court could not interfere with the Appellant’s hourly rate, as this was not something that the bank could have done (it having already agreed that rate).
The Master had erred in his approach: he assessed the costs as between the bank and the Respondent, rather than as between the Appellant and the bank, which would have been the correct approach.