Berlad Graham LLP wins ground-breaking High Court Appeal on ‘the one fifth’ rule under the Solicitors Act 1974

Ms Anna Goodwin, with Counsel, representing Berlad Graham LLP, won a ground-breaking High Court appeal brought by Berlad Graham’s client on the subject of the ‘one fifth rule’ and the nature of the  meaning of ‘special circumstances’ within the Solicitors Act 1974 and any departure from it.

STONE ROWE BREWER LLP v JUST COSTS LTD (2014)

QBD (Andrews J) 30/01/2014

CIVIL PROCEDURE – COSTS

BILLS OF COSTS : COSTS ORDERS : DETAILED ASSESSMENT : AWARD OF COSTS OF DETAILED ASSESSMENT : MEANING OF “SPECIAL CIRCUMSTANCES” UNDER S.70(10) SOLICITORS ACT 1974 : APPLICATION OF ONE-FIFTH RULE : SPECIAL CIRCUMSTANCES : SOLICITORS ACT 1974 s.70, s.70(10), s.70(9)

A master had erred in concluding that there were “special circumstances” within the meaning of the Solicitors Act 1974 s.70(10) justifying a departure from the normal rule under s.70(9) on the costs of detailed assessments. The “one-fifth rule” under s.70(9) applied to the total of all the bills ordered to go to a detailed assessment rather than to each of the bills individually.

The appellant solicitors’ firm (S) appealed against an order requiring it to pay 70 per cent of the costs of the respondent costs specialists (J) of a detailed assessment.

S had entered into a retainer with J under which J agreed to carry out work on detailed assessments on behalf of S’s clients. Following a breakdown in their relationship, S sought detailed assessments of 15 bills of costs pursuant to the Solicitors Act 1974 s.70. Before the hearing, S and J agreed that the bills should be assessed in the sum of £23,760 against the total of £33,543 claimed. Notwithstanding that that represented a reduction of more than one-fifth of the total sum claimed, the master ordered S to pay 70 per cent of J’s costs of the detailed assessment; he concluded that there were special circumstances within the meaning of s.70(10) justifying a departure from the normal rule under s.70(9) that J should pay the costs of the assessment because the amount of the bill had been reduced by more than one-fifth. In concluding that there existed special circumstances, the master had looked at the bills of costs individually, deciding who had been successful in respect of each of them, and then applied the one-fifth rule to each bill separately.

HELD: (1) Although S’s appellant’s notice had been filed out of time because it had originally filed the notice with the wrong court office, in the circumstances it was not appropriate to prevent it from proceeding with its otherwise meritorious appeal. (2) The real issue was whether the master had erred in deciding that he should depart from the general rule on the basis that there were special circumstances within the meaning of s.70(10). On an ordinary reading of s.70(10) and the words “special circumstances”, there had to be exceptional grounds making it unfair for the normal rule to apply. In deciding whether s.70(10) applied, a costs judge had to ask himself whether something had happened which made it unfair for the claimant to get his costs. Existing case law showed that claimants had generally only been deprived of the normal costs order where they were guilty of some sort of reprehensible or unreasonable behaviour, including where they had failed to beat an offer to settle by their opponent, they had unreasonably refused to negotiate, or they had racked up the costs by arguing pointless matters of law, Bentine v Bentine [2013] EWHC 3098 (Ch), [2014] C.P. Rep. 2 considered. “Special circumstances” did not necessarily exclusively refer to a claimant’s behaviour, but a finding of special circumstances could not extend to a situation in which, on an examination of the individual bills making up the total, it transpired that the defendant would have been victorious if the bills had been assessed separately and the one-fifth rule had been applied to each to them. The master had erred in assessing who had been the winner on each of the bills separately, and his approach drove a coach and horses through the scheme under s.70. The proper approach was one of totality, looking at the overall amount billed and applying the one-fifth rule to that. No special circumstances existed in the instant case. It followed that, once the one-fifth rule was applied to the total bill, S was entitled to the costs of the assessment.

Appeal allowed

Counsel:

For the appellant: Mark James

For the respondent: PJ Kirby QC

Solicitors:

For the appellant: Ms Anna Goodwin, Berlad Graham LLP

For the respondent: In-house solicitor