SOLICITORS ACT ASSESSMENTS AND THE 1/5TH RULE

SOLICITORS ACT ASSESSMENTS AND THE 1/5TH RULE

In an ideal world, all clients would be happy with the advice and services given to them and practitioners’ fees would be paid without demur. Unfortunately, although relatively rare, that is not always the case and clients seek to have their Solicitors’ costs assessed by the Court to determine the amount payable utilising a Solicitors Act Assessment.

In general terms, Solicitors are in a fairly good position with these assessments. The general rule is that costs will follow the event and that unless the client secures a reduction of 20% or more then the Solicitor will be entitled to recover the costs of assessment. However, that general rule is subject to exceptions and how both the general rule and the exceptions should apply have been considered recently in detail by the Court of Appeal in the cases (heard together) of Wilsons Solicitors LLP v Bentine and Stone Rowe Brewer v Just Costs Limited [2015] EWCA Civ 1168

This was a powerful Court of Appeal panel, with the Senior Costs Judge sitting as an assessor. There was some dispute between the panel as to the application of the law and Rix LJ gave a dissenting judgement on some aspects. Even the Judges who agreed reached their conclusions from somewhat different routes. In order to consider the judgement, it is perhaps best to start by setting out the relevant provisions within section 70 of the Solicitors Act in full:

(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.

In the Bentine case, the Solicitors rendered a bill of approximately £145,000. This included about £7,000 for a period where the client had lacked capacity to give instructions (“the hiatus period”) and about £25,000 in relation to the dispute about costs. At the hearing, the Costs Judge allowed about £95,000 and disallowed the hiatus period costs (on the basis that there was no valid retainer because the client could not give instructions for the work done during that period) and the costs claimed for the dispute itself (because the Solicitors were acting for themselves and therefore the Client was not contractually liable to pay those costs, they were more properly to be dealt with within the context of a costs order in the assessment proceedings). He found therefore that the bill as presented had been reduced by more than 20% and subject to any special circumstances the client should be awarded the costs of the assessment. He found that special circumstances did exist due to the manner in which the client had gone about the assessment had radically increased costs and therefore ordered that the Solicitors should pay 60% of her costs. The Solicitors appealed on the basis that the costs during the hiatus period and those of the dispute on costs should have been disregarded for application of the 1/5th rule. On that basis, the costs would not have been reduced by 20%, but they accepted that separate costs orders could be made in relation to the hiatus period costs and the costs incurred on the dispute as they were discrete matters. Proudman J agreed with this approach and referred to a case of “In Re A Solicitor [1936] 1KB 53 finding that such work was outwith the retainer and therefore should not have been brought into account. However, having won that battle, the Solicitors lost the war because the judge found that special circumstances did apply and that the client should still get 60% of her costs due to the manner in which the whole assessment had been conducted.

The Solicitors therefore appealed yet again to the Court of Appeal who, in a majority decision, found that the original Costs Judge had been right on both counts. They found that the provisions of the Solicitors Act were a self-contained code and their natural linguistic meaning should be applied. This was particularly important because often those challenging Solicitors bills were litigants in person and they were entitled to clarity. They found that there was no good reason to divide the overall bill up for the purposes of the 1/5th rule and that In Re A Solicitor was per incuriam. The dissenting judge did not go so far as finding In Re A Solicitor to be per incuriam, but found that it made little difference because the wording of the relevant statutes had changed and therefore it was not binding in any event. In the Stone Rowe Brewer case, bills had been rendered to the sum of broadly £33,000 but £20,000 of that was challenged on the basis that Just Costs were in repudiatory breach. Prior to the final hearing, the parties agreed a settlement at £23,700 but could not agree on the liability for costs of the assessment. The reduction was in the order of 30%, but the Solicitors argued that the main issue had been about repudiatory breach and that they had been successful in that regard. The Costs Judge agreed and therefore notwithstanding the 1/5th rule, provided for the client to pay the Solicitors 70% of their costs. The client appealed and in the High Court was successful on the basis that insufficient weight had been given to the overall reduction.

In the Court of Appeal, there was quite some discussion as to what would amount to special circumstances. It seems clear that they do not have to be exceptional and that whether or not something qualifies will be a value judgement when compared to run-of-the-mill cases. There will have to be something significant and out of the ordinary to justify depart from the general rule.

There was some criticism of the terminology used by the Costs Judge, but the majority of the panel found that he had come to the right conclusion in that it was appropriate to look at how the particular issues had impacted upon the assessment.

The dissenting judge disagreed on the basis that insufficient weight has been given to the fact that the 1/5th rule should apply and that on that basis the true victor was the client. He indicated that in those circumstances, even where there were some special circumstances such as this, he would not have departed from the general rule beyond depriving the client of their costs of the assessment and certainly would not have awarded the Solicitors their costs which he felt was going far too far. He felt that the Costs Judge had lost sight of who was the true victor based upon the statutory provisions.

What can be distilled from all of this discussion is that parties who bring complex issues to an assessment which may well increase the length of the hearing over and above that which might otherwise have applied, perhaps might have involved more senior Counsel and witness statements, again beyond that which would normally arise, may well face costs consequences even if the 1/5th rule is met. Special circumstances here will be based upon value judgements and therefore there is an inevitable lack of certainty over the way in which any particular Judge will approach the issue. The overall moral of this tale is – keep your clients happy and well-informed about costs and hopefully you will avoid the need for Solicitors Act assessments.