The One-Fifth Rule
It has been the practice of courts in recent years on Solicitors Act assessments to include any costs assessed off for want of retainer in the calculation of the one fifth rule, s70(9) Solicitors Act 1974. Such rule 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 those costs are paid by “the party chargeable”. This practice runs contrary to a pre WW2 Court of Appeal case, In Re a Solicitor (1936) which said that costs reduced through want of retainer fall to be disregarded for the purposes of the one sixth rule (as it was then) on the basis that they do not form part of the taxation.
The Detailed Assessment
In this case, Wilsons Solicitors appealed against a finding of Master O’Hare that almost £32,000 of costs invoiced by them to their client, but disallowed for want of retainer, having been incurred during a period when the client lacked capacity, should be factored into the one-fifth calculation, in line with modern practice and contrary to In Re a Solicitor (1936). The result of this was that the client was entitled to £59,000 costs of the detailed assessment. Had these costs been excluded from the one fifth calculation, the costs of assessment would have been the solicitors’.
The Master’s reasoning was thus….
“Despite what may appear to be clear authority in favour of the solicitors’ case on this point, my provisional view was that the costs disallowed for want of retainer should not lead to a reduction in the invoiced costs included in the one-fifth calculation: I provisionally ruled that arguments as to disallowances for want of retainer were irrelevant unless advanced as a special circumstance. Mr Farber, counsel for the solicitors, did not persuade me to the contrary: in my judgment the rule he argued for would bring unnecessary complexity to the calculation [of] what is, in most cases, a clear and simple starting point for the question who should pay the costs of the assessment.
“In my view there is no logic in treating differently, for the purposes of the one-fifth rule, costs which are disallowed for want of retainer from costs disallowed for any other reason…”
The solicitors appealed, relying on the application of In Re a Solicitor (1936). It was common ground that until this appeal, this Court of Appeal case had not featured in any argument about the one fifth rule.
Proudman J, found that the costs judge’s views as to logic were “insufficient as a ground of distinction from a binding authority.” Attempts to distinguish it from the present case were systematically dismissed as was an argument that the case had been decided per incuriam.
Notwithstanding her substantive finding in favour of the solicitors on the application of the one fifth rule the judge then agreed that there were special circumstances under section 70(10) for departing from it. These included that the solicitors had “steadfastly maintained” their 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. The effect of this finding was that the appeal was dismissed.
The judge also said that the fact the firm’s profit costs were reduced by 40% was also a factor.