PI Deductions: How to Navigate Cost Deductions Following the Recent Supreme Court Ruling
On Monday, our Director of Training and Insight, Professor Dominic Regan discussed a complicated yet highly relevant issue—client costs and solicitor-client disputes. As we dive into the Oakwood case and its implications, we’ll also tackle some recent legal updates that can affect both solicitors and their clients. Stay with us as we break down everything you need to know about deductions, client consent, and what’s changed in the legal landscape.
Before jumping right into the Oakwood case, let’s touch on a few other pressing matters.
Upcoming Announcement on Discount Rates
Without getting ahead of ourselves, it’s worth mentioning that there might be an announcement regarding a change in the discount rate. If such an update drops, it could happen sooner than many expect. While the current discount rate needs to be set in stone by January 11th, speculation suggests that an announcement could come any day now.
Why does this matter? It impacts the cost of claims significantly. Insurers, claimants, and solicitors all feel the effects when discount rates shift, so keep your eyes peeled for news. If anything changes with the rate, it will certainly affect the bottom line for everybody involved in personal injury cases.
New Guidance from the Legal Ombudsman
In late September, the Legal Ombudsman published important guidance that could reshape how lawyers and clients deal with cost challenges. Specifically, this guidance aims to create a clearer distinction between genuine complaints and those that just clog up the system.
There are two significant takeaways here:
- Clients shouldn’t negotiate on cost recovery – The Ombudsman made it clear: clients don’t belong in cost recovery negotiations between their own solicitor and the opposing side. This marks a reaffirmation of traditional practices, aiming to keep things streamlined.
- Solicitors can charge for providing old bills – If a client asks for an old bill they’ve lost, solicitors aren’t running a free-for-all service. The guidance confirms solicitors can charge a reasonable fee to recover, copy, and deliver these old bills. This is a practical approach, considering the time and resources involved.
Now, let’s dive into what you’ve all been waiting for—Oakwood.
The Oakwood Case: A Background Summary
The Oakwood case began years ago, in 2019 to be exact, yet it has only just wrapped up with a watershed ruling from the Supreme Court. At first glance, Oakwood may not seem like it will make huge waves across the legal scene. But the case hits hard on the fundamental issue: whether clients fully understand and consent to deductions made from their damages.
Dr. Mark Friston, an authority on costs (his work is often cited in court), even referred to Oakwood as a bit of a “footnote”—something that may generate buzz but won’t fundamentally alter the legal landscape. However, the case does illuminate some critical lessons about transparency and compliance in how solicitors handle client funds.
Let’s go through the nuts and bolts of the case.
Costs and Client Consent: What Was at Stake?
The crux of Oakwood involves a situation where a client was never provided with a formal bill of costs. Without that, according to the Solicitors Act, the clock hadn’t begun ticking for the client to challenge the deductions made from their damages award.
Here’s the key takeaway: Clients must be provided with a clear, explicit accounting. Simply making a deduction from a client’s damages doesn’t suffice unless the client understands exactly how much is being deducted. Let’s put ourselves in the client’s shoes for a second. Would you want someone pulling money from your account without laying out the specific amount they’re taking? Of course not.
For the client in Oakwood, their case was settled back in 2019, but since no formal bill was issued, time had not started to run. The Supreme Court ultimately decided that clients need to explicitly consent to the specific sum before any deductions are made.
Decisions in the Court of Appeal and Supreme Court
The Oakwood case bounced through several layers of the court system. It appeared before various judges, including Mr. Justice Borne, who initially ruled in favor of the client. His reasoning was that no proper settlement of the account had been made because full particulars of the deductions hadn’t been provided.
The case eventually made its way to the Court of Appeal. At this level, the judges seemed to align more with Cost Judge Rowley, ruling that time had already started to run. Once the client had agreed that deductions could be made without contesting the principle, that seemed enough to close the issue.
Then, finally, the Supreme Court weighed in. The ruling was decisive—a unanimous 5-0 judgment that reaffirmed a client’s right to clear and complete information.
The Supreme Court’s Ruling: What You Need to Know
The Supreme Court wasn’t subtle in its ruling. The judges said explicit and positive consent from the client is necessary. A client must not only understand that a deduction is going to happen but also know exactly how much will be deducted. General acknowledgment of cost recovery is not enough.
For instance, it’s not sufficient for a solicitor to say, “We’re going to deduct some costs now” without specifying the exact amount. The Supreme Court ruled that the Solicitors Act protects clients from this kind of ambiguity, ensuring they’re fully aware and able to contest deductions if they choose.
Critically, if deductions are made without the client’s clear knowledge of the exact figure, the solicitor may be acting outside the boundaries of the law. This could open the door for clients to challenge deductions long after a case has been settled—though whether it leads to a win for the client is another matter entirely.
Section 70 of the Solicitors Act Explained
Let’s zoom out for a moment. The Oakwood case is deeply rooted in what’s known as Section 70 of the Solicitors Act of 1974. This section covers a client’s right to request an assessment of their solicitor’s bill. Here’s how the timeline breaks down:
- Within one month of receiving a final bill, the client has an unconditional right to request an assessment.
- Between one month and twelve months, a client can still request an assessment, though the court has discretion over whether to allow it.
- After 12 months, assessments are only granted under “special circumstances.”
In Oakwood, no formal bill had ever been delivered, so technically the clock never started. This means the client could pursue their challenge years after the fact.
Key Lessons for Legal Practices
The Oakwood ruling offers several clear lessons for solicitors:
- Always provide a formal, transparent bill – Even when clients say they don’t care, send a bill. It triggers the limitation periods and protects your practice.
- Ensure explicit consent – It’s important the client knows the exact amount you’re going to deduct from their damages. This isn’t just courtesy—it’s now a legal obligation.
- Keep thorough records – You may not hear from a client for years after a case is closed, but if they launch a challenge, you’ll need to provide documentation. Make sure you’re ready when and if that happens.
Conclusion: What Oakwood Means for the Future
Moving forward, how might this ruling change things? Will clients suddenly file challenges by the dozens, demanding that costs be reassessed? That seems unlikely. The mere fact that clients can launch a challenge doesn’t mean they’ll succeed. Solicitors usually have the upper hand, as long as the costs are reasonable and necessary.
In truth, many won’t have any reason to look back on settled cases or entertain the effort of mounting a new legal battle. But Oakwood has shifted the playing field—solicitors must be proactive in issuing transparent, itemized bills to avoid sowing seeds of doubt in their clients.
As we walk away from the Oakwood saga, one thing is clear: transparency is crucial.
If you have any further questions about this ruling or how it might impact your own cases, don’t hesitate to reach out. Stay tuned for more updates on this topic and any breaking news related to discount rates or additional legal guidance.
