Reform of the Solicitors Act 1974, Part III
Written by Colin Campbell for the June edition of the Law Society’s Litigation Funding Magazine.
“Happy Birthday” is the traditional greeting given to anyone or anything on attaining their half century. Alas for the Solicitors Act 1974, that was not to be. Instead, with the approval of the Civil Justice Council (CJC), a Working Group under the chairmanship of Mr Justice Adam Johnson was established during the birthday year. Its task:-
“ To review the current regime for the regulation of solicitor and own-client costs, including the division in the treatment of contentious and non-contentious costs. “
The reason? An earlier CJC Costs Report in May 2023 had concluded that the Act was:-
“…clearly out of step with the reality of present-day litigation practice”.
That conclusion had drawn heavily upon the findings of the Court of Appeal in the seminal costs case of Belsner v Cam Legal Services Ltd [2022] Costs LR 1569 in which Sir Geoffrey Vos MR had said at [15] that the distinction between contentious and non-contentious business was “….illogical and outdated” and that at [61] “I have no doubt that the 1974 Act is in urgent need of legislative attention”. Nothing to suggest the popping of a champagne cork in that sentiment and certainly not the customary congratulation given to a person or entity on reaching its 50th Birthday! Quite the opposite in fact.
To understand why that was the case, it is necessary to journey back to the days even before those of Queen Victoria, to the implementation of the Act for the Better Regulation of the Attorneys and Solicitors 1729. To be found therein is the origin of the 1974 Act, namely that a solicitor cannot sue for fees until one month has elapsed from delivery of a bill. However, as a protection against overcharging, a client can apply to the court for detailed assessment (then called “taxation”) of that bill as of right within that month, in order to obtain an adjudication as to whether the charges rendered have been reasonable. That entitlement is preserved in s.70 of the 1974 Act.
The 1729 provisions re-appeared in consolidating Acts, notably in the Solicitors Act 1843 which introduced time limits for applying for taxation and included an extension to the client’s time for doing so “…under special circumstances” -see s.XXXVII. Next in the Attorneys and Solicitors Act 1870, there was an amendment which brought in a distinction between work done “before a court” and “not done before a court”.
Eleven years later came the Solicitors Remuneration Act in which the terms “contentious business” and “non- contentious business” appeared. Two more consolidating statutes followed: the Solicitors Acts 1932 and 1957, but the reality is that the 1974 Act altered little of what its predecessors had provided for : subsequent changes have almost been limited to the replacement of the term “taxation” with “assessment” and the permitting of electronic signatures to the bill. Little wonder, then, that an Act with its genesis in the days of the horse and cart is no longer legislatively fit to deal with client protection in an age of Conditional Fees Agreements, Damages Based Agreements and Litigation Funding Agreements, all of which were illegal and against the law when the Act was passed.
However, in defence of the 1974 legislators and their predecessors, if the purpose of the legislation was to provide protection for clients against brazen overcharging by rascal solicitors, it should be remembered that in Victorian times and for much of the twentieth century, the Solicitors Act provided the client with their only remedy. Contrast that with the position which pertains now. The back of the solicitor must be broad, because there are numerous consumer protection balls in the air with which firms of solicitors must juggle.
In addition to their rights under the Act, disgruntled clients can now look to the Solicitors Regulation Authority which deals with compliance and regulations, the Solicitors’ Code of Conduct which mandates what information a client should be given about price at the outset and during the case, the Legal Ombudsman who deals with complaints and can award compensation, the Consumer Rights Act 2015, and ultimately the Law Society of England and Wales. With so many ways in which a client is now protected from the type of unscrupulous behaviour which only the Solicitors Acts could prevent and discipline in Victorian times, it is little wonder that the 1974 Act is now out of step with modern conditions.
The Working Group’s Report was published on 6 May 2026 and has proposed amendments to the entire regime for the regulation of solicitor and own client costs contained in Part III of the Act. In addition, it has invited comments to be sent to the CJC by 16th July with the intention of publishing a Final Report in early 2027.
Perhaps the most radical proposal the Group has made is that the distinction between contentious and non-contentious business be abolished. The rationale for the two types of business appears to have its roots in the 1881 Act which sought to draw a line between work not involving the courts such as conveyancing, and other business transacted which did, in respect of which the solicitor could not be paid until the job was done -see Underwood Son & Piper v Lewis [1894] 2 QB 306. That meant that a solicitor could not bail out of the case halfway through without good reason: doing so would mean that the firm would go unpaid and be unable to charge for anything done so far. Sir George Jessel MR explained the rationale for that in re Hall v Barker [1893] 9 CH 538 :-
“If a man engages to carry a cigar box of cigars from London to Birmingham, it is an entire contract, and he cannot throw the cigars out of the carriage half-way there and ask you for half the money….”
Contrast that with non-contentious business when no such limitation to the time a bill can be delivered applies.
As the Report has recognised, such a distinction has created absurd anomalies and anachronisms. Consider the following :-
- No work transacted before proceedings are begun in a court of England and Wales is contentious business but upon issue, such work retrospectively becomes contentious business ab initio – re Simpkin Marshall Ltd [1959] Ch 229. Accordingly, all pre-action portal work (eg the Road Traffic Accident Small Claims Portal) is non-contentious business even though it is “litigation” in accepted sense of the word, unless or until proceedings are begun –see Belsner at [51]-[52]. Likewise work in the Tribunals, including the Employment Tribunal, although it is is adversarial in nature.
- In contentious business, the client must give “informed consent” to the solicitor’s contract of retainer, secured following “…a full and fair exposition of the factors relevant to it” – see Macdougall v Boote Edgar Esterkin [2001] 1 Costs LR 118. This does not sit comfortably with the well-established principle that a party who signs a document knowing that it is intended to have legal effect will generallybe treated as being bound by its terms and will be taken to have read them and be on notice of them- see L’Estrange v Graucob [1934] 2 KB 394. There is no equivalent requirement in non-contentious business.
- Contentious costs are assessed under Civil Procedure Rule (CPR) 44.4(3) and non-contentious costs under Article 3- Solicitors’ (Non-Contentious) Remuneration Order 2009. In practice, there is little difference, so why the distinction?.
The consequence of this, by way of example, is that a complex and very high value clinical negligence case may be conducted where liability has been admitted, without proceedings, and when quantum is then settled months or years later, all the business will have been non-contentious. Yet the same case would become contentious business ab initio upon proceedings being issued to approve that same settlement under CPR 21 should the client be an infant or protected party. In that eventuality, “informed consent” and detailed assessment under CPR 44.3 would apply, whereas, by dint of age or capacity, neither would be applicable to an adult litigant who had settled the same case before any proceedings had begun. Such an outcome plainly defies logic.
The Report is also critical of the formalities which apply to the actual billing of a client. In Victorian times, solicitors could only bill in contentious business when the job was done and the case was over -see Underwood above. In the modern era, with heat, light, rent, insurance and employees to pay, the need to bill the work before completion of the matter is important for cash flow. Thus, in most contentious work, it is “Pay-as-you-Go”. As the case progresses, the client is sent interim bills, the ability to do so having been reserved in the firm’s Terms and Conditions of Business. That also means that clients can budget and know where they are costs-wise going forward. Therein lies a further problem. There are two types of interim bill : interim “on account” which can be reopened at the end of the matter, and interim ”statutory” which are final and complete in respect of the work for period they cover. There can be no subsequent adjustment for any reason.
Herein lies the rub: time for applying for assessment under s.70 of the Act starts to run in respect of “on account” bills only when a final statutory bill has been delivered at the end of the case. It is the reverse for interim “statutory” bills. The s.70(1) absolute right to an assessment must be exercised within one month of delivery of that bill, even though the case may last several years. As Mr Justice Jacob expressed it in Harrod’s Ltd v Harrod’s (Buenos Aires) Ltd [2014] 6 Costs LR 975, that :-
“That causes difficulty when you have litigation which is ongoing. The client is called upon by these provisions to challenge an interim bill within one month, if he wants to do it as of right…… That puts him in an impossible position. Either he challenges his solicitors’ bill – the very solicitor who is now acting for him – and continues using that solicitor at the same time; or he has to change solicitor, all in the middle of litigation when he is facing another enemy”. “
The hazards of an arcane billing system such as this were not lost on the Working Group. Indeed, the perils for the client of interim “statutory” billing had already been exposed in Harrod’s. In respect of “on account” billing, it created the possibility of bills that had been paid and were many years old, being referred for detailed assessment. That was the case in Signature Litigation LLP v Ivanishvili [2024] Costs LR 1153 when paid bills worth over £12m were ordered to be assessed, which included work undertaken over a decade previously.
All of this, concluded the Working Group, has led to a clear economic case for reform. Whenever a client is unhappy, the matter has scope to develop into a dispute under the Part III regime. Where this happens, the processes under Part III are outmoded and inefficient, there is “huge potential for wasteful litigation” Indeed, that “…. the outdated regime contained in Part III …contributes and exacerbates the problem” – see Report at 3.31.
What is the answer?
The Report recommends a complete overhaul of Part III. This would involve (1) an end to the distinction between contentious and non-contentious business and (2) that solicitors’ charges should be subject to an overarching principle that they be “fair and reasonable” by reference to the job in question, judged on an objective basis. Guidance as to what is “fair and reasonable” would be given by wording resembling that used in Regulation 3 of the 2009 Order. In addition, the concept of “informed consent” would be scrapped as it has added unnecessary uncertainty to an already fragmented framework with no clear structure digestible for the layman – see Report at [3.26].
As to resolving issues about the amounts clients have been charged, the Report suggests that using the Ombudsman would be a more appropriate forum for resolving disputes involving smaller bills up to £50,000 than the court. For larger bills, in place of the existing procedure under which any application for assessment of a bill exceeding £5,000 must be brought in the High Court, the Working Group envisages that clients would first be required to exhaust any available internal complaints procedure. If that did not work, an ADR procedure such as mediation would be mandatory before there could be any recourse to the courts.
As for the bills themselves, the Report recommends that the concept of “statutory” bills should be abolished and that the contents and format should be set by conduct rules and by rules of court. The time limits for challenging a bill should be standardised. At present, the client’s entitlement to an assessment diminishes with the passing of time and whether the bill has been paid or is part paid and whether there are “special circumstances”, a nebulous concept -see s.70(3) and (4). The working Group recommends that there should be a single one year time limit in which to initiate court proceedings about bills, irrespective of whether they be interim or final, and regardless of whether the bill has been paid.
The Report envisages that implementation of the proposed changes could be achieved through limited primary legislation. This would also contain an enabling power under which a committee comprising the Lady Chief Justice, the Master of the Rolls and others would be empowered to make Orders specifying the factors relevant to the “fair and reasonable” analysis. Anything else could be addressed by changes to conduct rules and to the CPR.
If accepted, will the proposed changes work and has anything been missed out?
First, what does the Report not address?
In the context of time limits, there is only a passing mention of s.64. In contentious business, s.64(1) of the Act permits the solicitor to deliver either a gross sum bill or a bill containing detailed items. If the former, under s.64(2) the client can require within three months, delivery of a detailed items bill, at which point “the gross sum bill shall be of no effect”. There is no equivalent provision relating to non-contentious business and in any case, with modern billing, the continuing rationale for this distinction is questionable. If a bill provides the detail which 21st century case law requires (see Ralph Hume Garry (a firm) v Gwillim [2003] 1 Costs LR 77), there ought to be no need for a bill “containing detailed items”.
There is then the “wait to be sued” provision in s.64(3). A client who refuses or deliberately declines to pay a contentious bill need do nothing until sued for payment. In that eventuality, provided an application for detailed assessment is made within one month of service of the proceedings, the court must order it, however old is the bill. It is unclear why such a client should be in a better position than one who pays in full but misses the 12-month time limit under s.70(4) and why it only applies in contentious business.
There is also no mention of s.71 of the Act which gives rights to apply for an assessment to third parties such as a mortgagor under a mortgage or a tenant under a lease (see s.71(1)), or a beneficiary under a will (see s.71(3)).
In Kenig v Thomson Snell & Passmore LLP [2024] Costs LR 1, the Court of Appeal held that there was a distinction to be drawn between a beneficiary who would have an interest in the solicitors’ charges for administering the estate because they would affect the amount available for distribution, and third parties chargeable under s.71(1). So far as the latter are concerned, any assessment of the bills will be fruitless if they have been approved by the party chargeable (viz the mortgagee or landlord) – see Tim Martin Interiors Ltd v Akin Gump LLP [2012] 2 Costs LR 325. However, it is hard to see that there is any purpose in CPR 71(1) unless by amendment to the Act, the section is brought into line with the rights that beneficiaries now have under s.71(3).
Second, the Report makes no mention about who pays the costs of the assessment where the court has made an order under s.70 or s.71. At present, s70(9) provides that on an assessment, if the bill is reduced by less than one fifth, the party chargeable pays the costs, but if more, they are payable by the solicitor- (the “one fifth rule”). So far, so clear, but S.70(9) does not explain that a solicitor must provide a breakdown of his bill if it has been delivered in a “gross sum”. That breakdown can be higher than the bill, and no deductions are made from the bill until all disallowances from the breakdown have been exhausted. It follows that although a solicitor cannot recover more than the bill as delivered, where a breakdown exceeds the bill, it is a very hard task for the unsuspecting client, who would have expected any reductions to come first from the bill, to beat the one fifth rule. Given that the one fifth rule is controversial and gives rise to complex arguments on assessment, it is an odd omission that the Report has not addressed it.
As regards the Working Group’s proposals, scrapping the difference between contentious and non-contentious business and thereby ending the absurdity of the latter (non-contentious) becoming the former (contentious) ab initio upon proceedings being begun, are only to be welcomed. Likewise putting an end to the sterile arguments about “informed consent” can only be sensible.
The proposal to have a One-Size-Fits -All time limit of one year for applying for an assessment, however, is not without difficulty. Suppose the action is long running. A one-year deadline does not address the situation envisaged by Mr Justice Jacob in Harrod’s where the client is placed between the devil and he deep blue sea. Apply for an assessment under s.70 and take the risk that the solicitor uses this as grounds for ending the retainer so a new solicitor will need to be found mid-case.Fail to apply, and the entitlement to do so later will be gone forever.
The Report does not address the Signature Litigation either. If interim bills are rendered “on account” and must be challenged within twelve months, they can be reopened later. In these circumstances, what purpose will be served in having a bill assessed which is not complete for the period it covers and can subsequently be adjusted?
There is then the forum for dealing with clients unhappy with their bills. The Ombudsman is free and avoids the potential likelihood of getting bogged down in an acrimonious s.70 detailed assessment in the courts. However, the Ombudsman is already overwhelmed with cases, so this is a proposal blessed with good intentions, but falling short of a complete answer. In any case, a legitimate question to ask is what skills the Ombudsman actually brings to the party. Dealing with an overshoot of an estimate is one thing, but would the Ombudsman know how long a witness statement should reasonably take to draft, or what is a reasonable brief fee for counsel for a 10 day clinical negligence trial involving liability, causation and quantum?
On the other hand, keeping the dispute out of the court using costs mediation has the benefit of being quick and costs effective because (1) the parties choose the mediator who will be experienced in the law of costs and (2 ) the date on which the mediation is to take place, thereby saving a long wait for a court hearing. That is to be commended.
Overall, the Report makes good sense, in particular in recommending an end to the distinction between contentious and non-contentious business, and going forward, requiring costs to be “fair and reasonable”. However, it is the small print that will be tricky, and if that cannot be sorted out, it is legitimate to ask does Part III of the Act have any role to play in an age in which clients have numerous other consumer protection remedies at their disposal. Most importantly of all, will a government currently in turmoil have any interest in introducing legislation involving (to those who know no better), so called “Fat-Cat” lawyers? We must first wait until early 2027 for the next Report to see the final proposals which Mr Justice Adam Johnson will put the government prior to the implementation of primary legislation to reform the Act, if indeed, that ever happens.
Colin Campbell
Costs Judge 1996-2015
Deputy Costs Judge 1993-1996 and 2015-2022
Consultant at Kain Knight Costs Lawyers
