Litigation costs update – Solicitor and Client Assessments

The rules surrounding solicitor and client assessments, as set our under the Solicitors Act 1974 s70, on the face of it seem to be relatively straightforward. In particular, the “one fifth rule” is a long standing principle which the majority of lawyers understand. However, things are not always as clear as they seem, and further guidance has been given by the Court of Appeal in the case of Wilsons Solicitors LLP v Bentine & Anor [2015] EWCA Civ 1168 (19 November 2015).

The rules in question are s70 (9) and (10), which read as follows:

  1. 9) Unless—

    (a) the order for assessment was made on the application of the solicitor and the party chargeable does not attend the assessment, or

    (b) the order for assessment or an order under subsection (10) otherwise provides,

    the costs of an assessment shall be paid according to the event of the assessment, that is to say, if the amount of the bill is reduced by one fifth, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs.

    (10) The costs officer may certify to the court any special circumstances relating to a bill or to the assessment of a bill, and the court may make such order as respects the costs of the assessment as it may think fit.

The Facts – Bentine and s70(9)

Following the conclusion of the substantive proceedings, which related to the beneficial ownership of a property, Miss Bentine’s solicitors presented bills to her totalling £144,837.70, of which £110,124 was base profit costs excluding VAT. Following a detailed assessment under s70, Master O’Hare reduced the total of the bills to £94,933.94. The main reductions related to a hiatus period where work was incurred without the client’s instructions and also work incurred by the solicitors in respect of dealing with previous issues raised by the client in respect of the fees they were charging her.

When considering the effect of the “one fifth rule”, Master O’Hare found that all elements of costs should be included and therefore, in the current assessment, the Client was successful and the solicitors ordered to pay her costs. The solicitors appealed to the High Court on the basis that the hiatus period and costs dealing with fees disputed were discrete issues outside of the scope of the retainer and they should not have been included the the application of the “one fifth rule”. Whilst the High Court agreed with this argument, they found that special circumstances existed in accordance with s70(10) and the solicitors were ordered to pay the client’s costs as they had been at the original detailed assessment. As such, the appeal was dismissed.

The solicitors appealed to the Court of Appeal but again the appeal was dismissed for the following reasons:

“In my opinion there are two reasons why the High Court’s interpretation of section 70(9) should not be accepted, one short and one rather longer. The short reason is a simple matter of statutory interpretation of the special costs code contained in section 70 of the 1974 Act, as amended: the costs judge was right to hold that the amount of the overall bill presented by Wilsons was reduced by more than one fifth, so the costs of the assessment should be paid by Wilsons, subject to the exercise of his discretion under section 70(10). There is no good reason to divide up different elements within the bill for the purposes of application of the one fifth rule.

The longer reason is based on the fact that the decision in In re A Solicitor can be shown to have been decided per incuriam, on the basis of an erroneous understanding of the state of the law prior to the 1932 Act. This requires examination of some very old authorities and statutes, including in particular an Act for the Better Regulation of Attornies and Solicitors of 1729 (2 Geo. 2, c. 23) (“the 1729 Act”) and an Act for Consolidating and Amending Several of the Laws relating to Attornies and Solicitors Practising in England and Wales 1843 (6&7 V., c. 73) (“the 1843 Act”).”

The Facts – Stone Rowe Brewer and s70(10) 

In this case, Stone Rowe Brewer had instructed Just Costs Solicitors to provide legal services. Just Costs Solicitors submitted 15 bills to Stone Rowe Brewer that totalled around £33,000 and Stone Rowe Brewer requested a detailed assessment, in accordance with s70, of all 15 bills. It was common ground that they should be assessed together on an aggregate basis.

Just before the hearing commenced, the parties managed to agree an overall sum due under the aggregated bills of £23,700, which represented a reduction of about 30% of the total amount of the bills. However, the parties did not allocate any part of the settlement sum to particular bills, elements of bills or matters in dispute. This was despite Stone Rowe Brewer alleging that they were never liable for around £20,000 because Just Costs were in repudiatory breach of the retainer on certain bills.

The judge held that as Stone Rowe Brewer has bettered the “one fifth rule”, they would be entitled to recover their costs, subject to any special circumstances arising under s70 (10). The judge found that special circumstances did exist as Just Costs had successfully defended the repudiatory breach argument. If this had not been defended, Just Costs would not have recovered more than a maximum of £13,000. The judge therefore ordered Stone Rowe Brewer to pay 70% of Just Costs costs of the assessment.

The Court of Appeal dismissed Stone Rowe Brewer’s appeal for the following reasons:

“Although I did wonder whether Master O’Hare went too far in describing Just Costs as “the overall victor”, and failed thereby to give proper weight to the fact that according to the one fifth rule in section 70(9) SRB was the successful party, I consider on balance that this phraseology does not indicate any error of law or approach on his part. He had specifically reminded himself earlier in his ruling that SRB was the successful party according to the one fifth rule. In applying section 70(10), Master O’Hare was entitled to attach the respective weight that he did to the usual position under the one fifth rule and to the overall outcome for the parties on the issues debated in the proceedings.”

Comment

It is clear from the Court of Appeal’s comments that a costs judge has a relatively wide discretion in applying s70 (9) and (10). Therefore, if a party is considering applying for a solicitors act assessment, particular consideration must be given to exactly what would constitute beating the “one fifth rule” and further, when any special circumstances exist which may prompt the judge to depart from this.

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