High Court overturns current practice when calculating one-fifth rule

Disallowed costs: 1936 ruling applies

Costs that are disallowed for want of retainer should not form part of a costs judge’s calculations in applying the one-fifth rule, the High Court has said.

In a rare ruling on the issue, Mrs Justice Proudman upheld a 1936 Court of Appeal decision that overturns current practice.

The rule, contained in section 70(9) of the Solicitors Act 1974, provides that if a solicitor‘s bill is reduced by one fifth or more, then the solicitor will bear the costs of the assessment. If the bill is reduced by less than one-fifth or is not reduced, then they are paid by “the party chargeable”.

The detailed assessment of the costs of Wilsons Solicitors in Bentine v Bentine [2013] EWHC 3098 (Ch) came from their client, the defendant, losing capacity during the case and the Official Solicitor taking over as her litigation friend.

Master O’Hare decided that nearly £32,000 of costs invoiced by Wilsons but disallowed for want of retainer should be taken into account in making the one-fifth calculation. This meant that the defendant client was entitled to the £59,000 costs of the detailed assessment; without those costs, they would have been the law firm’s.

He dealt with the want of retainer issue by considering whether special circumstances existed such that the power under section 70(10) to disapply the one-fifth rule should be invoked. He found there were and allowed the defendant only 60% of her costs.

Proudman J said her assessors – Master Campbell and Graham Humby – confirmed that it has hitherto been the invariable practice of costs judges to include in the one-fifth calculation sums claimed in relation to which there was no retainer.

They believed that the point has not been taken since the 1974 Act was passed, even though there has been a reference in the White Book to In Re Taxation of Costs In re A Solicitor [1936] 1 KB 523 since at least 1999. “In other words, it is the experience of both assessors that until this appeal, Re A Solicitor has not featured in any argument about the one-fifth rule,” she said.

Though she systematically dismissed the arguments that Re A Solicitor should not apply, and found for Wilsons on the point, Proudman J then agreed that there were special circumstances under section 70(10), meaning the appeal was dismissed.

These included that Wilsons “steadfastly maintained” its entitlement to the disallowed costs, meaning the Official Solicitor was bound to proceed with the assessment, and that the firm spent a day of court time unsuccessfully arguing its entitlement to £7,000 of costs.

Proudman J said that the fact the firm’s profit costs were reduced by 40% was also a factor.

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