Wilsons Solicitors LLP v Bentine & Anor

Factual and Procedural Background

There are two appeals concerning the operation of sections 70(9) and (10) of the Solicitors Act 1974 ("the 1974 Act"), which govern disputes between solicitors and clients over fees charged in bills. The 1974 Act, a consolidating statute amended by the Legal Services Act 2007 ("the 2007 Act"), establishes a code for assessing solicitor's bills upon application by the client or solicitor, including rules on costs allocation depending on whether the bill is reduced by one fifth ("the one fifth rule") and the possibility of special circumstances modifying this rule.

The first appeal ("the Bentine case") arises from a dispute between a mother and daughter over property ownership, with the daughter represented by Company A (the solicitor). During the proceedings, the daughter lost mental capacity, and Company A continued work without valid instructions during a hiatus period. The case settled, but Company A's bills totaling approximately £145,000 were subject to detailed assessment. Certain costs related to the hiatus period and a dispute over fees were disallowed. The costs judge included these disallowed costs in the one fifth rule calculation, resulting in a finding that the bill was reduced by more than one fifth, entitling the client to costs of the assessment, subject to adjustments for special circumstances. Company A appealed, arguing that the disallowed costs should be excluded from the one fifth calculation. The High Court upheld Company A's position but still allowed the client 60% of her assessment costs on the basis of special circumstances. Company A then appealed to this court.

The second appeal ("the Stone Rowe Brewer case") involves Company B (a solicitor firm) as client of another solicitor firm ("Just Costs"). Just Costs presented 15 bills totaling about £33,000, which Company B sought to have assessed together. Disputes included repudiatory breach allegations relating to five bills and issues of excessive charges and rate reductions. The parties agreed a settlement amounting to a 30% reduction overall but left the costs order of the assessment to be decided by the costs judge. The costs judge found Company B to be the winning party under the one fifth rule but identified special circumstances justifying a departure from the default costs order, awarding Just Costs 70% of their costs. Company B appealed, and the High Court allowed the appeal, holding that no special circumstances existed. The matter was then before this court.

Legal Issues Presented

1. What is the correct interpretation and application of the one fifth rule in section 70(9) of the Solicitors Act 1974 regarding the calculation of costs reductions in solicitor's bills, specifically whether disallowed costs unrelated to the retainer should be included in the calculation?
2. What is the scope and application of the "special circumstances" provision in section 70(10) of the 1974 Act, allowing the court to depart from the default costs order under the one fifth rule?
3. Whether the costs judge's discretion in applying section 70(10) was exercised correctly in the Stone Rowe Brewer case, particularly regarding the weight given to the statutory "winner" under the one fifth rule.
4. What is the proper approach to interpreting consolidation statutes, such as the 1974 Act, in light of prior case law on predecessor statutes, and whether the decision in In re A Solicitor [1936] 1 KB 53 remains binding or was decided per incuriam.

Arguments of the Parties

Appellant's Arguments (Company A in Bentine case)

• The disallowed costs related to the hiatus period and the costs dispute should not be included in the one fifth rule calculation as they were not within the retainer.
• The relevant calculation should exclude these costs, resulting in a reduction less than one fifth, making Company A the successful party entitled to costs.
• The High Court erred in principle in exercising discretion under section 70(10) to award the client costs despite this.

Respondent's Arguments (Client in Bentine case and Company B in Stone Rowe Brewer case)

• The one fifth rule should be applied to the total bill as presented, including disallowed costs, consistent with the natural meaning of section 70(9) as amended.
• In re A Solicitor was incorrectly applied and should be considered per incuriam; the proper interpretation supports inclusion of all reductions in the bill for the one fifth calculation.
• Special circumstances justified a departure from the default costs order in Bentine case, warranting an award of 60% of costs to the client.
• In Stone Rowe Brewer, the costs judge properly found special circumstances to depart from the default rule, considering the complexity and nature of disputes across multiple bills.
• The High Court erred in narrowly interpreting "special circumstances" and improperly overturned the costs judge's discretion.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the statutory framework of the 1974 Act as a self-contained code governing the assessment of solicitor's bills, emphasizing that it should be interpreted according to its natural language without undue reference to antecedent statutes or case law unless ambiguity arises. The court concluded that the one fifth rule in section 70(9) applies to the total amount of the bill presented, including disallowed costs related to work outside the retainer, rejecting the restrictive interpretation from In re A Solicitor as decided per incuriam.

The court traced the legislative history, noting the evolution from the 1729 Act through the 1843 and 1932 Acts, highlighting that the 1843 Act and subsequent authorities (notably In re Clark) established that all reductions in the bill, including those for work outside the retainer, must be included in the calculation. The 1974 Act, as a consolidation statute updated by the 2007 Act, incorporates this broader interpretation.

Regarding the exercise of discretion under section 70(10), the court recognized that "special circumstances" must be a significant and out-of-the-ordinary factor justifying departure from the default costs order. The costs judge's evaluation of special circumstances in the Stone Rowe Brewer case was entitled to deference, as it involved a value judgment informed by the complexity and nature of the disputes across multiple bills.

However, the court also emphasized that the costs judge must not lose sight of the statutory "winner" under the one fifth rule when exercising discretion under section 70(10). The issue-based approach taken by the costs judge in Stone Rowe Brewer was critiqued for effectively disregarding the statutory winner, which the court found to be an error of principle. The appellate court corrected this by allowing the appeal and adjusting the costs order accordingly.

In the Bentine appeal, the court dismissed the appeal but on grounds differing from the High Court, upholding the costs judge's inclusive approach to the one fifth rule calculation and his discretion under section 70(10) to adjust costs due to special circumstances.

The court also discussed the principles of interpreting consolidation statutes, relying on Farrell v Alexander and related authorities, establishing that such statutes should be construed primarily on their own terms, with reference to prior law only if ambiguity exists. The court expressed a provisional view that binding precedent on prior statutes remains authoritative unless overruled or found per incuriam, but in this case, In re A Solicitor was found to be per incuriam.

Holding and Implications

The court rendered the following decisions:

• In the Bentine appeal: The appeal is DISMISSED. The court upheld the costs judge's interpretation that the one fifth rule applies to the total bill including disallowed costs related to work outside the retainer, and that the discretion under section 70(10) to adjust costs for special circumstances was properly exercised.
• In the Stone Rowe Brewer appeal: The appeal is ALLOWED. The court held that the costs judge erred in failing to give adequate weight to the statutory "winner" under the one fifth rule when exercising discretion under section 70(10), and adjusted the costs order accordingly, concluding that no order as to costs was the fair outcome.

The implications of these decisions clarify the proper application of the one fifth rule in solicitor's bill assessments, affirm the interpretation of the 1974 Act as a self-contained statutory code to be read on its own terms, and emphasize the importance of balancing statutory protections for clients with judicial discretion in costs orders. These rulings provide guidance for future solicitor-client fee disputes and the exercise of discretion on costs in assessment proceedings, ensuring predictability and fairness in costs allocation.