Bentine v Bentine

The case in which costs are claimed was brought by a mother against her daughter in the Central London County Court for the court to determine their respective beneficial interests in certain property. The details of that dispute are immaterial for present purposes. The daughter, Miss Bentine, was represented by Wilsons LLP (“Wilsons”) solicitors. During the proceedings it became apparent that Miss Bentine was losing capacity to continue. On 2^nd July 2009 a doctor certified that Miss Bentine did not have capacity so matters had to wait under CPR 21.3 (3) until she was represented by a litigation friend. The Official Solicitor agreed to act on 3^rd August 2009. Thereafter the action was settled, HHJ Dight ordered a detailed assessment of Miss Bentine’s costs pursuant to CPR 48.3 and Wilsons sent in its invoices for the detailed assessment.

Those invoices included Wilsons’ charges for the period between 2^nd July 2009 and 3^rd August 2009 and also its charges for the period in which there was a dispute between Wilsons and Miss Bentine as to costs.

It was agreed between the parties that Master O’Hare (“the Costs Judge”) should treat the assessment of the invoices as for a Solicitors Act 1974 (“the 1974 Act”) Part III assessment. Costs entitlement is provided for by s. 70(9) of the 1974 Act, which in the form applicable to this case provided, in the events which happened, that (subject to finding special circumstances under s. 70 (10) of the 1974 Act, an issue with which I deal separately):

Schedule 16 of the Legal Services Act 2007 (“the 2007 Act”) deleted all references to “tax” and “taxation” in the 1974 Act, substituting the words “assess” and “assessment”. In s. 70(9) of the 1974 Act the words, “if one-fifth of the amount of the bill is taxed off” have been replaced by “if the amount of the bill is reduced by one-fifth”.

A Costs Judge has jurisdiction under s. 70 (10) of the 1974 Act to disapply the one-fifth rule if satisfied that there are special circumstances justifying such an order. The way the Costs Judge dealt with the matter was to rule against Wilsons’ contention that costs invoiced for want of retainer should have been deducted before the one-fifth calculation was made and deal with the want of retainer issue by way of consideration of whether there were special circumstances. In the event, Miss Bentine was allowed only 60% of her costs of the assessment on the ground of special circumstances prevailing against her, applying s. 70 (10) of the 1974 Act.

At the heart of this appeal is the issue identified in paragraph 7 v) of the Costs Judge’s judgment dated 31 August 2012, namely whether costs disallowed for want of retainer should be excluded from the total of invoiced costs for the purposes of the one-fifth rule. At the heart of this question in turn is the applicability of the principle enshrined in the decision of the Court of Appeal in In Re Taxation of Costs In re A Solicitor [1936] 1 KB 523 (“Re a Solicitor (1936)”), that costs reduced through want of retainer fall to be disregarded for the purposes of the one-fifth rule because they do not form part of the taxation.

The costs disallowed for want of retainer in the present case were certain costs invoiced in Parts 3 and 4 of Wilsons’ breakdown and the costs invoiced in Part 9. Parts 3 and 4 included £7,050 (including VAT) which was invoiced for costs of work done between 3 July 2010 and 2 August 2010, a period during which there was no-one with capacity to instruct solicitors. Part 9 (£24,860 including VAT) covered the period after Wilsons was in dispute as to costs, claiming the costs of work done by Wilsons to negotiate those costs and then work done in applying to the Costs Office. The Costs Judge pointed out that a solicitor has no contractual right to such costs in an assessment under the 1974 Act because the work was done against a former client and not for the client or on the client’s behalf. As a result, Wilsons withdrew its claim to the Part 9 costs at the hearing before the Costs Judge.

Neither the disallowance of these costs nor the finding that they were not contractually chargeable on an assessment under the 1974 Act is challenged on this appeal.

If the costs disallowed under Parts 3, 4 and 9 were taken into account (as they were) the bills would have been reduced by a fifth or more and Miss Bentine would have been entitled to the costs of the assessment, amounting to £59,000, expended over 11-12 days: see [3] of the Costs Judge’s Judgment. If the disallowed costs were taken out of account entirely, then they were not reduced by one-fifth and Wilsons would have received its costs of the assessment. I have been greatly assisted by the assessors in relation to the figures, which I attach in an appendix, although it appeared at the handing-down stage today that there may have been a discrepancy between the invoices and the breakdown.

I should say at this juncture that the assessors confirm that it is (or at any rate has hitherto been) the invariable practice of the Costs Judges to do what the Costs Judge did in this case by including the sums claimed in relation to which there was no retainer in the calculation of whether the respondent had succeeded in beating the one-fifth rule contained in s. 70(9) of the 1974 Act. It is however also their belief that the point has not been taken since the 1974 Act was passed, although there has been a reference to Re a Solicitor (1936) in the Supreme Court/Civil Procedure Rules Practice (The White Book) at least since 1999. In other words, it is the experience of both assessors that until this appeal Re a Solicitor (1936) has not featured in any argument about the one-fifth rule. My decision in this case is however one with which they agree.

I must say something about the manner in which the appeal was conducted before us. It was set down for hearing for one day and was heard on 25 April 2013 but it was adjourned part heard. As it was hard to co-ordinate my diary and those of the assessors we were unable to sit again until 1^st July 2013 when the matter took a further day. Thereafter Mr Brown for the Official Solicitor lodged a further four page note “intended to clarify two matters arising from [Wilsons’] oral submissions…principally factual matters”. This then led to a written response (by way of a five page note) from Wilsons’ counsel, Mr Hutton QC. Mr Brown then said that he wanted to reply by way of a further note. Indeed he then said that he had a new point to raise which would be determinative of the issue before the court. This caused consternation among my assessors and me and I responded through my clerk that although we were prepared to take the existing written notes into consideration we would not permit written submissions to go on indefinitely. The system is one of adversarial advocacy and if the respondent wished to make further submissions this had to be done orally in open court. My clerk was sent about four pages of cross emails passing between counsel which she summarised for me. There has been no formal application to reopen the appeal by way of oral hearing. The assessors and I were in any case firmly of the view that further oral submissions would be wholly disproportionate to the sums at stake. We also considered that the additional written submissions already received added little to the points in issue. Counsel eventually agreed (at the end of a long email string) that we should just have regard to the first two written submissions already received. We have therefore done so.

Re a Solicitor (1936) was an appeal from a decision of Singleton J, who had upheld an Order of Master Ball who had treated a sum of £317, disallowed for want of retainer, as taxed off within the meaning of the Solicitors Act 1932 s.66 (5) and thus comprised within the calculation of the one-sixth (as it then was) requiring the solicitor to pay the costs of the taxation.

In that case the solicitor had addressed his bill to the client Mr Sudbury and another client, Mr Green, jointly, and Mr Sudbury had taken the point, which the taxing officer decided in his favour, that parts of the bill related to the separate business of Mr Green.

The Court of Appeal allowed the appeal on this point. Scott LJ, giving the judgment of the whole court, said (at 531),

Mr Hutton QC relies on the application of Re a Solicitor (1936) to the present case and the fact that as a decision of the Court of Appeal it is binding on this court. He says that the Costs Judge’s decision does not properly distinguish the case but merely dismisses it on the ground in effect that he did not like it. The Costs Judge said, at [12]-[13] (all unattributed paragraph references hereafter are references to paragraphs of his judgment):

I agree with Mr Hutton that the Costs Judge’s views as to logic (which are, in any event, contrary to those expounded by Lord Eldon in Rigby v. Edwards, see below) are insufficient as a ground of distinction from a binding authority. I also agree that it cannot be right that “all of those earlier cases” (that is to say, the cases relied on in Re a Solicitor (1936)) are better explained as exercises of the power to vary the one-fifth (or, as it was then, one-sixth) rule in the exercise of the court’s discretion: cf [17].

Mr Brown argues however that Re a Solicitor (1936) does not apply. I identify the following grounds on which he relies with which I propose to deal in turn.

He asserts that Re a Solicitor (1936) does not apply to the present situation because of the extended jurisdiction of the Costs Judge, failing which,

he asserts that Re a Solicitor (1936) only applies where the client himself has raised the issue of want of retainer and not, as in the present case, where the issue arises through want of capacity (invoices 3 and 4) or where (invoice 9) it is the taxing officer who has himself raised the issue. In any event he asserts that invoice 9 is not a want of retainer case, failing which,

he asserts that in the present case Item 9 was not disallowed for want of retainer, failing which,

he asserts that Re a Solicitor (1936) was decided per incuriam, failing which,

he asserts that Re a Solicitor (1936) is disapplied by the amendments to the wording of s. 70 (9) of the 1974 Act made by the 2007 Act.

This is Mr Brown’s principal argument. At the first hearing I understood his submission to mean that Re a Solicitor (1936) has been overtaken by the increased jurisdiction of the Costs Judge since SI 1986 No 632 giving a taxing officer the jurisdiction to tax costs under Part III of the Solicitors Act 1974. However we were not given all the extracts from the cases and statutes and neither I nor the assessors could understand the point that was being made. The only relevant changes in jurisdiction were that the Costs Judge could make the order for taxation and that the Costs Judge could determine the issue of special circumstances, neither of which changes appeared to provide a ground of distinction from Re a Solicitor (1936).

Indeed Mr Brown appeared to be arguing that the taxing officer had no authority at all until 1986 to determine the question of retainer. This was notwithstanding that the taxing officer evidently did so in White v. Milner (1794) 2 H BL 357, Rigby v. Edwards see the first instance decision at 5 Mad 20 (1820), Mills v. Revett (1834) 1 Ad & E 856 and Re a Solicitor (1936) and there was no challenge in any of these cases to his decision on the ground of jurisdiction. When asked about this Mr Brown responded that these might be unusual cases where the order for taxation gave the taxing officer specific jurisdiction to determine the issues. He accepted that he had no evidence to support that contention.

However it now seems that the argument is the more subtle one that although the taxing officer did in fact exercise jurisdiction to determine the question of retainer by the middle of the 19^th century, he did not do so under the applicable statute which only enabled him to “tax off” exorbitant charges. Mr Brown says that the jurisdiction of the taxing officer under the earlier statutes excluded considerations as to whether there was any liability under the retainer and was merely to assess exorbitance. He says that it was the understanding of practitioners that the statute was not applicable where the foundation of the demand was in dispute. He submits that the position changed thereafter so that the Costs Judge was correct to have regard to all the deductions made in asking what the event of assessment was.

Mr Brown relies on several cases in support of his argument: Jones v. Roberts (1834) 2 Dowl PC 656, Evans v. Taylor (1834) 2 Dowl PC 349, Matchett v. Parkes (1842) 1 Dowl PC (NS) 924, In re Springall (1844) 3 Beav 63, In re Bracey [1845] 8 Beav 266, In Re Thurgood (1854) 19 Beav 541, In re Inderwick [1883] Ch D 279, Re Jones [1887] 36 Ch D 110, Re Herbert [1887] 34 Ch D 50, In Re Pyne (1887) 5 CB 407 (1887) and In re Frape [1894] 2 Ch 290, as well as White v. Milner, Mills v. Revett and Re a Solicitor (1936). He also relies on a passage about White v. Milner in Hullock on Costs Vol 1, p. 516.

Cases under the 1729 Act are relied on as showing that the client had submitted to payment of the whole sum due on taxation subject only to assessment of exorbitance of the charges. While the 1843 Act removed the requirement that a client submit to a liability to pay in order to obtain an order to tax, it nevertheless preserved the distinction between deductions made in the course of taxation and disputes as to retainer.

It is said that the basis for the earlier decisions was that the client, in seeking a reference to taxation, admitted his liability to pay subject only to a determination of the exorbitance. The provisions of the 1729 and 1843 Acts and the practice of the Court was such that orders for taxation were made only where the client made such an admission. Thus any reduction made on the basis of want of retainer occurred not in the course of taxation under the statute or order. The outcome was justified on the basis of the client’s earlier admission and was completely different, it is said, from what now happens in assessments.

Mr Brown submits that as it is no longer the practice of the Court to admit or submit to a liability to pay any of the bills either in part or as a whole, and as a costs judge now has all the powers of the High Court (including powers to summon and examine witnesses) no order for taxation is required in order to give the costs judge jurisdiction to determine issues of liability. Further, the distinction made in the 1729 and 1843 Acts between issues as to liability to pay and as to the exorbitance of the charges are no longer valid as a client’s liability to pay is limited in all cases to the payment of reasonable costs.

The cases show that the taxing officer repeatedly did determine the issue of whether the relevant section of costs was inside or outside the retainer. That appears from the reports of Re a Solicitor (1936), White v. Milner, Mills v. Revett and Rigby v. Edwards. In In re Bracey, the Master of the Rolls said the following,

Mr Brown’s riposte was that the judgment of the Master of the Rolls shows a distinction between the position at equity and at law. The basis of deduction for want of retainer was not under the statute but in equity since the court had no power under the statute to make the deduction. He relies on the next passage in the judgment,

The Master of the Rolls continued,

In Re Bracey was concerned with matters of form and the question of who should pay the costs of the petition for a special order for taxation. It was held that a party applying for a special order for taxation, in a case in which he might have obtained a common order, had to pay the costs notwithstanding that he succeeded. The problem with Mr Brown’s submission is that the taxing officer plainly did always have jurisdiction in equity to decide questions of want of retainer. In any event, Re a Solicitor (1936) was decided after 1925 so that the distinction between forms of action in law and in equity had disappeared.

It seems to me that none of these cases (in so far as they are relevant, and some of them in my judgment relate to the impact of negligence claims on the taxing officer’s jurisdiction) does more than say that bills incurred where there is want of retainer do not form part of the taxation under the statute. That is confirmed by the passage from Hullock.

Mr Brown relies on the underlying reason for the rule in Re a Solicitor (1936), namely Lord Eldon’s statement that,

Mr Brown submits that the rule applies because a client is not entitled to approbate and reprobate by saying on the one hand that there is no retainer permitting him to have an assessment but, on the other, saying that costs should be reduced as part of the assessment itself. The operative words are therefore “at the instance of the client”. The present case, Mr Brown argues, is a paradigm one because Wilsons agreed to an assessment under the 1974 Act.

However it seems to me that the distinction is between items for which the client is not liable at all to the solicitor, which do not form part of the assessment, and items for which he is liable but where there is a dispute as to the reasonableness of the charges. This is apparent from the report of White v. Milner, as follows:

In Mills v. Revett, it seems that the taxing officer himself excluded certain items from the taxation on the ground that the plaintiff was not liable at all to the solicitor in respect of those items.

In my view it does not make any difference whether the want of retainer is raised by the client or by the Official Solicitor or the Costs Judge himself on Miss Bentine’s behalf. The question for the Costs Judge in the assessment process is the reasonableness or otherwise of the bills. The issue whether they are within the retainer is a necessary preliminary to the assessment process.

Master Campbell raised the difficult intermediate example of the case in which the client authorises the solicitor to engage junior counsel but the solicitor engages leading counsel. Is that a want of retainer case or a case of exorbitant charging? Mr Hutton answered the question by saying that in want of retainer cases one is not looking at particular items being assessed but at (as was said in White v. Milner) “a whole branch of it being disallowed”. Accordingly, such a case would form part of the assessment and thus be included within the one-fifth rule. In any event, said Mr Hutton QC, the fact that he might be wrong about that did not affect the principle in a clear case.

Mr Brown submits that the Part 9 costs were not costs excluded from Wilsons’ retainer. He says that the Costs Judge made no finding that the retainer had ended. However, paragraph 8 of the Costs Judge’s decision contains the following passage:

In my judgment the contract referred to is the contract of retainer, a finding which is emphasised by the reference to “former clients”. I therefore agree with the Costs Judge’s conclusion at [21]. Even if I am wrong and the Part 9 costs are not strictly within Re a Solicitor (1936), the same principle must in my view apply to them as was expounded by Lord Eldon in Pytches v. Revett as reported in Beames (see below): “…what was thus struck out of the bill was struck out not upon taxation, but on a quite a different ground…”. Actions which are adverse to a client rather than actions performed for the client’s benefit are outside the scope of the assessment.

I am not prepared to decide that Re a Solicitor (1936) was decided per incuriam. I observe in passing that it would be a brave puisne judge indeed who would make any such finding. He will always start from the proposition that the Court of Appeal is more likely to be right than he is. Secondly, and vitally in the present case, the case which the Court of Appeal is said not to have regard to was Pytches v. Revett (December 1821, so not Mills v. Revett under another name) in which Lord Eldon apparently doubted the correctness of his earlier decision in Rigby v. Edwards. However the only reference for Pytches is the extract from Lord Eldon’s judgment and what is said about it in Beames (2^nd Edition 1840) (“A Summary of Doctrine of the Courts of Equity with respect to Costs, deduced from Leading Cases”) at 257.

Beames was before the Court of Appeal in Re a Solicitor (1936) in the same edition, citation being made in the judgment of the Court (read by Scott LJ) from the very same pages, p. 255-260, as are relied on by Mr Brown: see p.531. It is evident from the analysis of Beames at p. 531-2 that the whole passage and the footnotes were considered by the Court of Appeal and while nothing was said about Pytches there is no question of it having been overlooked, either according to the technical rules about decisions reached per incuriam or indeed in substance.

I would add that the outcome of Pytches v. Revett does not appear from the report in Beames. Counsel’s note of what Lord Eldon said in that case reads as follows:

However, there are two important footnotes in Beames at p. 60:

It is possible that the final outcome of Pytches was in accordance with Rigby v. Edwards. However (assuming that the second note in Beames does indeed refer to Rigby v. Edwards and not to Pytches) the outcome of Pytches is simply unknown and was properly disregarded in Re a Solicitor (1936) in any event.

Lastly, there is the question of the effect of the 2007 Act. It is my firm view that the 2007 Act was neither intended to, nor did, make the kind of radical changes to the 1974 Act that are alleged. The Costs Judge was right to so find. Those changes brought the nomenclature of the 1974 Act up to date in accordance with the changes in the Civil Procedure Rules, in particular the replacement of the word “tax” with “assess”, “taxation” with “assessment” and “taxed off” with “reduced”.

The fallacy in the argument that the word “reduced” rather than “taxed off” brought about change in substance revoking the principle in Re a Solicitor (1936) is exposed by the Court of Appeal’s explanation that the words “taxed off” have the same meaning as “reduction” in the following passage in that case (at 532):

Indeed, it is apparent from the quotation from Lord Eldon at 531 that the expression “taxed off” means no more than that the taxing officer has taken certain sums off the bill pursuant to the statute. In this connection I note that the 1974 Act cannot be distinguished from the Solicitors Act 1932 for this purpose as the 1974 Act is, like the Act of 1932 and an intervening Act of 1957, expressed to be a codifying Act. Indeed in Re a Solicitor (1936) an argument that the Act of 1932 was to be distinguished from the Act of 1843 was (at 529) rejected. See also Ward LJ’s review of the history of the Solicitors Acts in Ralph Hume Garry (a firm) v. Gwillim [2002] EWCA Civ 1500.

S. 70 (10) of the 1974 Act as now in force provides that the costs officer “may certify to the Court any special circumstances relating to a bill or to the assessment of a bill, and the court may make such order as respects the costs of the assessment as it may think fit.” Since 1986 the Costs Judge has jurisdiction to make the order himself.

It was common ground that there is hardly any reported case law at High Court level (and nothing above) on what amounts to special circumstances within the section. The only modern example cited in the White Book is Angel Airlines v. Dean & Dean [2008] EWHC 1513 (QB) at [25] to the effect that the statutory presumption could be reversed by a clear without prejudice offer made in proper time and form.

Special circumstances is a phrase used also in s. 70 (3) of the 1974 Act and the notes to the White Book at Vol II 7C-118 cite authorities saying that such circumstances must be “exceptional”.

The Costs Judge declined (see [27]) to certify that the want of retainer arguments constituted special circumstances for the purposes of s. 70 (10) of the 1974 Act. He said at [28],

However the question he was considering was whether it was inequitable for the solicitors to pay the costs, not the other way round. He had decided that want of retainer costs did not fall to be disregarded in the application of the one-fifth rule: see the summary at [19] and also [24]. He went on to find that what he rightly described as the “tortuous and expensive course” which the assessment had taken did amount to a special circumstance justifying a departure from the one-fifth rule so that Miss Bentine was only awarded 60% of her costs.

In the course of his judgment in Pytches as reported in Beames Lord Eldon said (explaining what he had done in Rigby v. Edwards),

Thus the rule in s. 70 (9) of the 1974 Act does not allow a solicitor free rein with his bills. He is to be appropriately penalised in costs for claiming want of retainer costs which should not have been claimed in the assessment at all. He cannot benefit from including improper charges which fall outside the retainer. This is as one would expect; if it were not so a solicitor would have no disincentive against inserting charges in bills which should not be there. If they were simply disallowed for want of retainer the reductions would not count against him under the one-fifth calculation.

The Costs Judge’s comments on the time taken by inclusion of the Part 3, 4 and Part 9 costs are as follows. The hearing took in total 12 days [3]. The periods within which Miss Bentine lost capacity and the effect of that loss were matters which were hotly debated in the detailed assessment and took up a large part of one day [27]. Invoice 9 was withdrawn when challenged by the court so that there was little if any argument on it [24].

Thus one means of dealing with the matter would be to say that the costs of one day out of the 12 days should be paid by Wilsons but that otherwise the appeal should succeed in its entirety. However it is not as simple as that. First, Lord Eldon referred not to the costs of an improper insertion, but the costs “occasioned by” it. There is likely to have been more than one day of court time “occasioned by” the inclusion of the Parts 3, 4 and 9 costs.

So another means of dealing with the matter would be to make an issue based order. This is plainly the course favoured by Lord Eldon. However an issue based order should be avoided unless there is no alternative: see the new CPR 44.2 (7) which provides that before making an issue based costs order the court should consider making a proportionate order or an order as to costs from a certain date. Even without this guidance I would not consider it right to make an issue based costs order in the present case. There has already been a wholly disproportionate amount of time and money spent chasing a much smaller amount of costs. To involve the court in identifying those costs for which Miss Bentine was liable, and separating out those relating to the retainer for which she was not, would illegitimately prolong this assessment to the point of absurdity. The assessment must be stopped now.

That leaves the vexed question of how the matter should be dealt with instead. Are there are any factors constituting special circumstances?

As Wilsons came to court asserting an entitlement to be paid nearly £150k and left having been allowed only some £95k it is evident that Miss Bentine was heavily overcharged. The profit costs claimed in the bills were reduced by some 40%. However, I agree with Mr Hutton QC that to adopt such an umbrella approach would be to sideline the effect of Re a Solicitor (1936) so I do not do so, although in circumstances where an issue based order is plainly disproportionate, I cannot entirely ignore the overall effect of what happened.

Secondly, I accept Mr Brown’s submission that the fact that Wilsons steadfastly maintained its argument that it was entitled to the Parts 3, 4 and 9 costs meant that the Official Solicitor was bound to proceed with the assessment. As a public officer he is obliged to take all reasonable points on behalf of a client under a disability and it is unfair that he should be deprived of his costs of so doing. There was no scope for settling the case by agreement.

I do not accept Mr Hutton’s submission that the disallowance of the costs between 2 July and 3 August 2009 was “very harsh on the solicitors”. Wilsons should have realised as soon as there was a doctor’s certificate that Parts 3 and 4 were irrecoverable and outside the scope of the retainer. It should have been aware of the Guidance Notes at 6 (iii) to rule 2 of the Solicitors Code of Conduct 2007. Although it was right for Wilsons to take steps to arrange for the Official Solicitor to be instructed as litigation friend (Wilsons was obviously mindful of Rule 2.02 of the Solicitors Code of Conduct 2007) it should have realised that it could not charge fees during the period of incapacity. Instead, Wilsons spent a day unsuccessfully arguing that it was so entitled to the Part 3 and 4 costs. That is a day of court time arguing over some £7,000 to which Wilsons was not entitled. Tortuous and expensive indeed.

All the above are special circumstances allowing me, in the exercise of the court’s discretion, to depart from the one-fifth rule in this case. Wilsons should pay the costs of the assessment, although Miss Bentine’s costs will be limited as provided for in [39].

The Costs Judge reduced the costs to which Miss Bentine was entitled by 40% to take account of the special circumstances constituted by the tortuous and expensive course taken by her team on the assessment. I am not prepared to revisit that finding against the Official Solicitor in the guise of a fresh decision on special circumstances prevailing against Wilsons, for example making a proportionate order as to the costs of the assessment and replacing the whole of the order made by the Costs Judge with that new order. Master O’Hare is an experienced costs judge. A decision on percentages is part and parcel of his everyday professional life.

Accordingly, although Wilsons succeeds as to the application of Re a Solicitor (1936) it loses on the issue of special circumstances. For this reason the appeal is dismissed.