A look at a number of cases over the last 160 years in the higher and lower courts dealing with ‘special circumstances’ under the Solicitors Act (1843 to 1974)
SPECIAL CIRCUMSTANCES UNDER s70(3) SOLICITORS ACT 1974
SPECIAL CIRCUMSTANCES : s70(3) SOLICITORS ACT 1974
Section 70(3) of the Solicitors Act 1974 provides that where an application for assessment is made by the party chargeable:
(a) after the expiration of 12 months from the delivery of the bill, or
(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or
(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill.
no order shall be made except in special circumstances
In other words a client who fails to apply within the specified time limits will not be entitled to have their solicitors’ costs assessed unless they can demonstrate that special circumstances exist to justify an order being made.
In Riley v Dibb Lupton Alsop (1997) 147 LJ 1422 Sedley J observed that “special circumstances” do not have to be “exceptional”.
So, what amounts to special circumstances?
It has been long established that what amounts to special circumstances is a value judgment. This was affirmed in Falmouth House Freehold Co Ltd v Morgan Walker LLP [2010] EWHC 3092 (ch) [13]:
“Whether special circumstances exist is essentially a value judgment. It depends on comparing the particular case with the run of the mill case, in order to decide whether a detailed assessment in the particular case is justified despite the restrictions contained in s 70(3)”
In that case, in a short and to the point judgment Lewison J upheld the decision of Master Simons (costs judge) that special circumstances existed by reason of the “large sums involved” and the confusing state of the solicitors’ witness statement in opposition to the application.
Other cases shed some light on the court’s approach to special circumstances. However, the wide discretion available is clear.
In two Victorian cases, the high level of costs was held to be sufficient to justify an assessment.
In In Re G.B.B Norman [1886] 16 Q.B.D 673 Lord Esher (dealing with a bill which also contained substantial errors) said:
“To sum up the material facts, there were very large bills of costs, a gross blunder, and a very extraordinary charge: these circumstances do amount to “special circumstances” within the meaning of the [Solicitors Act 1843], and I think the bills of costs ought to be taxed”
Going back even further, in Re Robinson [1867] LR 3 Ex 4 the court found that “an unusual charge of a large amount require explanation to justify it” amounted in itself to a special circumstance.
However, it is not always so clear cut. Fast forward 137 years.
In Winchester Commodities Group Ltd v RD Black & Co [2000] BCC 310, Mr John Martin QC held that the stark level of the fees in issue was “at first sight a good point“; but that for a variety of other reasons on the facts of that case the point turned out to be of little substance. He held:
“Viewed in the light of those seven factors, it seems to me that what at first sight is a good point, that it is indeed remarkable that so high a level of fees can be charged for apparently so little result, turns out to be a point of little if any substance. I am not prepared to regard it as amounting to a special circumstance justifying assessment of those bills.”
Counsel for the solicitors in Falmouth House Freehold (above) sought to rely on Winchester Commodities in support of the proposition that “the fact that there are large sums involved is not a special circumstance“. However, this was rejected by Lewison J who held that in light of the seven other factors identified:
“that case is not authority for the proposition that the amount of fees in issue is irrelevant to the question whether there are special circumstances”
In Edwin Coe LLP v Aidiniantz and Others [2015] 1 Costs LO 129, the clients in defence to an action for recovery of unpaid fees pleaded special circumstances on grounds of both the high level of fees and “reasonable” delay, arguing that it was reasonable to wait until the litigation had concluded before seeking an assessment.
In relation to “reasonable delay” HHJ Richard Seymour QC said:
“Bearing in mind the absolute entitlement of a litigant to have his solicitor’s costs assessed under Solicitors Act 1974 s 70(1), provided only that the application was made within one month of the delivery of the bill, it seems to me that it was not a “special circumstance” of the present case, justifying an order for assessment under Solicitors Act 1974 s 70(3), that the litigation to which the bills related was continuing… All that was required … was an application for the assessment desired within the one month period. The actual assessment could take place thereafter at some convenient date…. no evidence was led before me which suggested that there were particular circumstances of the present case which demonstrated that it would have been unreasonable to seek assessment whilst the relevant litigation was continuing.” [116]
In relation to the “unreasonable” level of costs the judge held:
“I have already expressed my view that, in order to be satisfied on the question of possible benefit it was appropriate for a costs draftsman, or someone similarly qualified, to have been called to give expert evidence, but that that did not happen…” [127]
“…if compelled to express a view I would have said that it was not obvious to me, in the light of my experience in other cases, that the costs charged by Coe were excessive..” [130]
Special circumstances were not made out and judgment was entered for the solicitors.
As we have seen, in Edwin Coe Ltd, the judge held that it would not be unreasonable to apply for an assessment within one month of delivery of a bill and then to wait until the end of the end of the litigation to proceed with the assessment. This may not be practical in all situations.
Although in slightly different circumstances, Master James (costs judge) recognised at first instance in Richard Slade And Company Solicitors v Boodia & Anor [2017] EWHC 2699 (QB) the potential practical difficulties of requiring “a multiplicity of applications under Section 70 merely to preserve the client’s right to apply for assessment.”
The same potential impracticalities were recognised by Master Leonard at first instance in Bari v Rosen (t/a RA Rosen and Co Solicitors) [2012] 5 Costs LR 851:
“The potential difficulties and expense faced by a client who can only challenge regular bills by instituting multiple assessment proceedings – against the same solicitor who is actively handling a number of current matter for him – are obvious. Further, the choice is between a right which begins to diminish after one month from the first regular bill and a right which does not begin to diminish until a later and, for the client, obviously more practicable time.”
This can be avoided.
In Arrowfield Services Ltd v BP Collins (a firm) [2003] EWHC 830, Mr Michael Briggs QC overturned a decision of Master Campbell (costs judge) that an agreement between the parties that there could be a detailed assessment of the relevant charges and that no point would be taken as to the elapse of time for that assessment did not amount to a special circumstance. The Judge held:
“if parties come before the Court on an application for a detailed assessment in circumstances where there subsists an agreement that there should be an assessment to which the solicitor has consented, and from which he has not freed himself in the manner which I have described, or in some recognisable manner, that is as powerful special circumstances as it is possible to conceive for ordering a detailed assessment. He has apparently agreed that the protection given to him by the time limits should not apply because he has agreed that the assessment should take place, in this case as I have found, unconditionally.”
Master Simons followed the reasoning of Mr Michael Briggs QC in Barnes & Anor v Messrs Stones (a firm) [2007] EWHC 90069 (Costs) when he determined that an “understanding” between the parties that there could be an assessment coupled with the solicitors’ failure to provide a breakdown amounted to special circumstances [43]:
“In my judgment, the understanding between the parties that there should be a detailed assessment coupled with the delay on the part of the Defendants, in providing a breakdown and a “bill”, constitute special circumstances that entitle the Claimant to apply for a detailed assessment outside the 12 month time limit.”
Another example of a prior agreement amounting to a special circumstance can be found in the SCCO case of BFS Investments Plc v Manches Plc [2007] EWHC 90082 (Costs).
Master Gordon-Saker (costs judge) [33-35]:
“…the e mail dated 11th January 2007 contained a clear representation by the Defendants that if the outstanding fees were paid the Defendants would take part in the detailed assessment of any of its fees which the creditors’ committee wished to challenge. “Any of our fees” to my mind must mean any of the bills raised by the Defendants and not just those which were then outstanding.
“Although the offer or representation made in this email was not expressly accepted or even referred to subsequently, the correspondence which followed (as contained in “APSF 5”) – the reservation by Mr Wood of the right to seek assessment and the formulation of the undertaking – reveals an understanding that there would be a detailed assessment if that was required even though all of the bills had been paid. That understanding must have been founded on the email of the 11th January and the Defendants’ offer “to engage”.
“That offer – designed to secure payment – and the consequent understanding that there could be a detailed assessment after payment of the bills in my judgment amounts to special circumstances sufficient to justify the making of an order for assessment of the paid bills.”
So, is failure to provide a breakdown enough to invoke s70(3)?
Not necessarily.
In Re Metal Distributors Ltd [2004] EWHC 2535 (Ch) Pumfrey J held that the mere failure to provide a breakdown of charges to the client did not in itself amount to a special circumstance:
“The company … urges upon me the consideration that the company has reasonably asked for a breakdown of the bill which has been declined. Whether that is a matter of good client management or not is not a matter for me, since I am concerned only with the question whether these bills are presently payable. In my judgment they plainly are. It is accepted that there is no challenge to the quality of the work done by Messrs Devonshires which is represented by the bills, and there is no suggestion of any claim in respect of negligence.” [3-4]
“Client management” can sometimes play a part however. What if a solicitor gives misleading information about a client’s rights to assessment?
In Kundrath v Harry Kwatia & Gooding [2005] 2 Costs LR 279 the High Court overturned the decision of Master Rogers (costs judge) who had held that even though a letter from the solicitors might well have seriously misled the claimant as to her rights, her delay in applying for an assessment precluded him from ordering such assessment.
The letter in question said:
“It is a matter for you to apply to the Supreme Court Costs Office for an order that this bill be assessed. Since more than one month has elapsed any order made by the court to assess the bill will be conditional on you paying into court 40% of the bill.”
Whilst recognising that the letter was “a complete misrepresentation” and “inaccurate” which may well have misled the client into thinking that she could only get the bill assessed if she paid 40%, the Master held:
“I do not think Miss Kundrath has come anywhere near establishing that there are any special circumstances in this case and in those circumstances I have no alternative but to dismiss this application”
Overturning the decision on appeal, Beatson J held:
“…the letter was not merely “inaccurate” and “a misrepresentation” but, given the inequality of the parties, it amounted to the sort of pressure which it has been recognised is capable of amounting to special circumstances: see Re Norman (1886) 16 QBD 673 and Cook on Costs page 46. The pressure on the lay client arising from the induced belief that the court would not assess a bill unless 40% of it is paid into court is in effect conduct by the respondent solicitors that may dissuade their client from seeking a costs assessment.” [11]
Incidentally, in relation to delay, the judge considered it relevant that the solicitors could not show prejudice:
“I have in mind the unexplained delay between August 2002 and the issue of the Statutory Demand in March 2003, its service in June 2003 and the institution of bankruptcy proceedings on 21 October 2003. That is undoubtedly a long period of time for which there has been no satisfactory explanation… There is, however, no evidence before me that this delay has caused significant prejudice to the respondent.”
Can a client reserve his rights to have costs assessed out of time?
This may not be sufficient. However, it may be a relevant factor taken in combination with others. In Kris Motor Spares Ltd v Fox Williams LLP [2009] EWHC 2813 (QB) the court was concerned with amongst other things, an email from the client (KMS) to its solicitor, dated 11 May 2011, which said:
“I am disappointed with the way this matter was dealt with and costs paid to Barlow Lyde on the disclosure application. You have asked for taxi fares/meals etc which I do not think were part of arrangement. Your cost estimate are not accurate … Under protest I will settle your account and expect the papers to be immediately transferred to [the new solicitors]. I now formally demand that you tax/assess your costs pursuant to Solicitors Act 1974”.
It was argued that this amounted to an “express reservation of the right to tax” and a special circumstance under s70(3). Master Rogers at first instance held otherwise.
Upholding the Master’s decision on appeal, Holroyde J first determined that “the letter might fairly be regarded as a reservation of KMS’s rights, albeit clumsily expressed” but went on to hold [109]:
“I accept that a reservation of the right to tax is a highly important factor, but it is not to be viewed in isolation [107] … I agree with Mr Bacon’s submissions to the effect that in a case such as this it would be surprising if relatively minor queries about aspects of a solicitor’s bill, raised late in the day and in a manner suggestive of a last attempt to avoid having to pay a bill which was properly charged, could amount to special circumstances. Even if I make the assumption which I have indicated above in favour of KMS, I conclude that in all the circumstance of this case the reservation of the right to tax carries far less weight than it would do in many other cases. I agree with Master Rogers’ conclusion, in paragraph 96 of his judgment, that Mr Krishnani’s reservation is not here sufficient to amount to a special circumstance justifying detailed assessment of the entire bill.”
In Sharif v The Law Society [2005] EWHC 90018 (Costs) Master Rogers had to determine an whether special circumstances applied in an application brought by a solicitor for an assessment of bills rendered by intervention solicitors (into her practice) to the Law Society.
Ms Sharif argued that special circumstances existed to justify her request for an assessment out of time. In her accompanying witness statement she said:
“There has been immense pressure on me personally since the intervention as I have paid hundreds and thousands of pounds in legal fees and the firm’s debts alone. I have had a very difficult time in the last year and a half, and I am suffering from depression. Out of the firm of four partners, only one partner has had to face the brunt of the Law Society. I have found it extremely difficult to cope with such pressures and on top of it all, to look after three children all under the age of four years.
“My family life, my health and my career have greatly suffered. I have suffered huge financial loss.
“The Law Society have been very unfair with me. During the last nine months before the intervention, I was on maternity leave with my second child, however, the Law Society has only targeted me and not any of the other partners who, in my opinion, are jointly and severally (sic) liable according to the Law Society’s own rules”
Master Rogers’ sympathies extended only so far:
“I was referred by Mr Wade to a succession of letters written by the Law Society to the Claimant making it very clear to her that if she wished to challenge the intervention agents’ charges, then she should promptly apply to the court for an order for detailed assessment. Indeed, in reply to one of those letters, in May 2004, the Claimant actually said that she was going to do that but as already indicated, the actual application was not issued until 9 August 2005, though in fairness to the Claimant’s current solicitors, it appears to have been received in the SCCO originally on 29 July 2005.
“I have also to take into account that the Claimant is a solicitor who must be presumed to know rather more about such matters than a layman, coupled with the fact that she has had no less than three firms of solicitors and the benefit of two firms of costs draftsmen to advise her and yet it was only at the end of July this year that she issued her application.
“In the circumstances, I am not satisfied that the evidence she has put before me entitles the Claimant to successfully contend that there are “special circumstances” in this case.”
As noted by Master Rogers in Sharif [23]:
The position regarding special circumstances is that there is no hard and fast rule as to what can amount to special circumstances and the authorities show that the facts of the particular case have to be looked at.
And finally, rewinding back to 1908 under the Victorian statute, in the words of Vaughan Williams LJ in Hirst v Capes [1908] 1 K.B. 982:
“No one says that ‘special circumstances’ must necessarily be circumstances of fraud, dishonest practice, or extortion, or anything that kind… Inasmuch as the Legislature has not in the Solicitors Act, 1843 given any definition of ‘special circumstances’ they must refuse to formulate any such definition; but it is also plain that, although the question whether there are special circumstances is one for the exercise of the judge’s discretion in each particular case, the discretion which he also has so to exercise is a judicial discretion; and, if a Court of Appeal think that in what he has decided he has clearly not exercised a Judicial discretion, they may overrule his decision, but otherwise they will not interfere with it.”
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